USA - Will economic strength last?27 Oct 2018 01:40
Markets are starting to price in slower economic and profit growth as the bull market and business cycle age. The stimulus from tax cuts will eventually fade and the Federal Reserve's interest rate hikes may also weigh on the economy. Trade wars and slowing overseas growth don't help.
In fact, the S&P 500 is now trading below where it was on December 22, 2017, the day President Donald Trump signed the tax cuts into law.
New numbers released on Friday show the US economy grew at a healthy 3.5% pace in the third quarter. The GDP growth, largely in line with expectations, represents a modest deceleration from the brisk 4.2% growth in the fourth quarter.
Colas said he's confident the bull market isn't over. Investors are merely anticipating a deceleration in profit and economic growth.
"I strongly believe this is a correction. Underlying economic fundamentals are still very good," said Colas.
Nicholas Colas, co-founder of DataTrek Research.