US Economy: Another Amazing Deathbed Recovery?

The economy's apparent rise from the dead generated fears of a potential Fed rate increase and a sharply accelerating economy

Robert Johnson, CFA 24 May, 2016 | 9:54AM
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The Fed fixation continues. We have gone through a Fed dance every few months in a cycle we seem doomed to repeat. The dance steps include an economy that apparently is gaining momentum, Fed governors openly worrying about the stronger economy and musing on higher rates, followed by a softer stock market and weaker economic data. Then the Fed backs away from threatened rate increases, markets rise, and the economy acts better.

The economy was neither nearly as weak as appeared this winter, nor as strong as it appears now

Repeat every three to six months. This has been ongoing since late 2014, maybe earlier if you count the worries over when the Fed would stop buying new bonds under one of its quantitative easing programs. At the moment, the U.S. economy has undergone the stronger-economy and whispering-about-a-rate-hike step of the dance. We think that the strong-growth step may not last as long as usual.

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About Author

Robert Johnson, CFA  is director of economic analysis with Morningstar.

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