Stock markets gaining on increased hope in growth prospects and lower rates in 2007 – one of them is true – which one?
Fred Day
Dec. 26, 2006

The true picture is out. Treasury yields fell as growth in U.S. retail sales between Thanksgiving and Christmas slipped to 3 percent this year from 5.2 percent in 2005, according to MasterCard. The stock market rose with a hope of higher growth in 2007 and lower rates also in 2007.

Common investment sense says one will be true. If the growth is solid, rates will not come down. If the growth falters the rates will be lower. Interestingly, as gold advanced, so did dollar. What that says is that dollar is relative getting stronger with respect to major currencies.

The indications are there that growth will falter but growth in US will far better than the rest of the world. The Euro zone, the Asia can suffer larger economic slow down while US may be headed for a slow growth environment.

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