In his Daily Market Notes report to investors, while commenting on preliminary GDP, Louis Navellier wrote:
The biggest news this week, was the Federal Open Market Committee (FOMC) statement on Wednesday, which said that “progress” had been made towards meeting its goal and that it would continue its $120 billion per month in quantitative easing until “substantial further progress.” Essentially, the FOMC kicked its “tapering” decision down the road, but admitted it would address tapering later this year. Translated from Fedspeak, that means the Fed would likely provide tapering guidance after its December FOMC meeting.
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Interestingly, the preliminary estimate for second quarter GDP from the Commerce Department’s U.S. Bureau of Economic Analysis came in at an annual rate of only 6.5%, which was substantially below economists’ consensus estimate of 8.4%. The good news is that personal consumption rose at an 11.8% annual pace, which was significantly higher than economists’ consensus expectation. There are going to be multiple revisions to the second quarter GDP estimate, but there is no doubt that the weaker than expected preliminary GDP report will provide the Fed more time to sustain their accommodative policy of low interest rates and aggressive quantitative easing.
The Labor Department on Thursday reported that weekly unemployment claims declined to 400,000 in the latest week, but this was significantly higher than economists’ consensus estimate of 380,000. As a result, the Fed can remain accommodative, due to the fact that unemployment claims are not declining as fast as economists are anticipating. Some of GM’s auto plant shutdown due to the global semiconductor shortage are apparently responsible for last weekly higher than expected unemployment claims. The good news is job openings have reached a record level, so wages are expected to steadily increase due to the shortage of workers in many industries.