2014 MID-YEAR Market Outlook

Moving Into a New Phase

Since the end of the Great Recession, economists have repeatedly predicted that the United States would soon step onto a path of above-trend growth, only to see the economy slip into a slow-growth rut. For a while it appeared that pattern would be repeated in 2014. The consensus outlook began the year looking for above-trend growth, only to see real GDP fall by roughly one percent in the first quarter. To be sure, the unusually harsh winter had taken a toll on economic activity, but business investment was disappointing, and the recovery in the housing market had stalled on the back of a rise in mortgage rates. In late spring, however, monthly economic indicators — including those in labor and housing markets — started turning positive. It now appears that the first quarter weakness was indeed mostly weather-related, and the economy is in the early stages of a sustained period of growth at roughly a 3%