Growth in the Spring

Maybe this time?

Source: Western Gardeners

In the cult classic “Being There,” Peter Sellers plays Chauncey Gardiner, a simple-minded gardener who lives with a wealthy benefactor. When his patron dies, Chauncey is turned out into the streets. Through a series of random encounters, he ends up advising the US President on economic affairs, at one point saying, “There will be growth in the spring”—an allusion to a garden’s growth, but something others over-interpret to mean that their economy would soon improve.

In March 2009 Fed Chair Ben Bernanke told CBS’s “60 Minutes” that he saw green shoots in the economy, signs of a nascent recovery to the Great Recession. Immediately he was likened to Chauncey. Even other Fed economists were skeptical. One of the staffers noted in a meeting that their forecast of an improving economy was much more like a small potted plant than a large leafy tree. But Bernanke’s forecast was accurate. The recession ended that June.

Now the economy is looking at more “growth in the spring,” and it seems pretty robust. The latest employment report notes that economy created 295 thousand jobs last month. Year-over-year employment is up 2.3%, a percentage gain not seen in almost 15 years. Former Dallas Fed President Bob McTeer quotes the Dixie Chicks and tells his ex-colleagues to “let ‘er rip” and start raising rates.

Source: Bureau of Labor Standards

If the economy continues to grow at this pace, higher interest rates seem all-but-inevitable. Unemployment is at 5.5%. Some Fed officials think the US economy is already at full employment. While hourly wages haven’t yet begun to rise, wages are a lagging indicator. Activity precedes price.

Since 2009 several other central banks have raised rates anticipating a recovery, only to lower them later when their economies stalled out. Let’s hope that this doesn’t happen this time.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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By |2017-07-17T12:23:01+00:00March 9th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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