Gross Domestic Product for Q2 came in at an anemic 2.4%,which was weaker than expected.Tom Porcelli of RBC Capital Markets says that,normally,recovery means 4-5% GDP growth.It seems like a pretty good environment for investors to continue their Treasury purchases.If you look at revenue increases,they are only at 9% year over year.The economy still remains very,very moribund.
This sentiment is echoed by Bill Dunkelberg,Chief Economist of the National Federation of Independent Business.The recovery this time has been led by rebuilding inventory,Mr.Dunkelberg observed.For the last two years,we got rid of everything we could trying to stay in business,and now that is being replaced.
Consumer sales aren't there,and profits are down.The consumer doesn't feel comfortable doing anything more than what is absolutely necessary,Bill Dunkelberg noted.
Reports released this morning showed a drop in both factory orders and pending home sales.Under such conditions,triple digit market gains may be unsustainable.
Royal Bank of Canada(RBC)
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