Economic Outlook: Extreme Outbursts Predict Market Jumps as GDP Slumps

While last week’s Economic Outlook luncheon hosted by the Executives’ Club painted a rather dull picture for the U.S. economy in 2012, the event was anything but boring. The panelists exhibited emotional extremes, laid explosive blame and presented outrageous solutions and predictions as each delivered a relatively similar forecast of anemic 2% growth in the GDP along with an optimistic upswing in the stock market.

Diane Swonk, Chief Economist at Mesirow Financial began her comments by blaming today’s global ills on men and the lack of women leaders. She also believes we should insist on Santorini as collateral should the Euro zone melt down. One of her biggest concerns is that Europe could derail us.

“Decoupling is a myth,” said Swonk. “When one major economy falters, the whole world falters.”

However, she believes the euro will survive, because the cost of it failing would be greater than the cost of continuing the Euro zone.

She forecasts the U.S. economy will grow at 2.25% and the Dow Jones industrial average will end up at 13,500 this year. Her prediction for last year, that the Dow would end up between 12,500 and 12,700 was pretty close.

Dennis Gartman, Editor of The Gartman Letter, continued the discussion of extremes stating that Europe will narrowly avoid recession this year while growth in China will continue to accelerate with GDP growth there between 9.5% and 10%.

Germany’s ability to continue to export highly engineered, high quality goods in high demand, and China’s move to lower the cost of food to avoid their own version of an Arab Spring, and cranks out the low cost goods Americans can’t get enough of, are the reasons Europe will avoid disaster and China will grow.

Gartman expects the Dow to rise 8% this year while our economy just “muddles along” barely reaching 2% growth.

As to why unemployment will remain high, he notes that old people can’t afford to retire and small business can’t get access to credit which means they can’t afford to hire anyone.

“The banking system in this country has a new plan and the plan is anyone that needs money, we’re not going to give it to you and anyone that doesn’t need money we’ll be happy to lend you that money.”

He added for workers at large corporations doing the work of two or three people in the wake of the layoff of thousands of workers during the recession, relief isn’t coming. Companies have learned they can make do with much less and will continue that model. “It’s a great business model,” he said, causing the room to erupt in nervous laughter as many saw themselves in that scenario.

Finally, Robert Froehlich, Executive Vice President and Chief Investment Strategist for Wealth Management at The Hartford Financial Services Group, contends the euro is doomed. However, he believes the Dow will end the year at 16,500.

In global equities, he forecasts prices to be 10% higher by the end of the year. “If I’m wrong, I’m low.”

Tags: 2012 economic forecast, Chief Economist at Mesirow Financia, dennis gartman, diane swonk, dow jones industrial, Economic Outlook, Economic Outlook luncheon, Editor of The Gartman Letter, euro, euro zone, Executive Vice President and Chief Investment Strategist for Wealth Management at The Hartford Financial Services Group, Executives' Club, executives' club economic outlook luncheon, Executives' Club of Chicago, gdp, hartford financial services group, mesirow financial, robert froehlich, the gartman letter, u.s. economic forecast, u.s. economy

No comments yet.

Leave a comment