Many investors are eagerly awaiting the latest policy statement from the Federal Reserve, due out Wednesday, as they remain highly focused on what will happen to the economy and markets when the Fed eventually pulls back its asset-purchase programs.
These concerns are certainly valid as US economic data continues to be mixed. Last week, while reports on new home sales and durable goods orders were both solid, an important leading indicator — the Chicago Fed National Activity Index (CFNAI) — came in weaker than expected and negative for a fourth month in a row.
In fact, the CFNAI, a forward-looking metric that has historically done a good job of forecasting future growth, suggested that US growth, after a weak first quarter and what looks to be an even weaker second quarter, is off to a sluggish start in the third quarter, and corporate earnings estimates for the third and fourth quarters may need to be scaled back.
However, as I write in my new weekly commentary piece, while earnings downgrades associated with disappointing US growth remain a risk for US stocks, market events last week – particularly in Europe and Japan — provided some improving news for global growth.
Next page: Global growth