Stock prices and the mean expected NGDP growth rate resumed their rise last week, after taking a breather the week prior. The S&P 500 is now up nearly 7% so far this year. This is yet another example of a net positive real shock, as oil prices and inflation expectations fell, while stock prices were apparently boosted by better-than-expected NVIDIA earnings. This is possibly further evidence that increased investment in AI will soon lead to a productivity boom, to go along with the immigration boom discussed in recent weeks.
It’s not all rosy for the immediate economic outlook, however. The VIX is still elevated due to increased domestic political and geopolitical risks, along with rising inflation risks. That is, inflation expectations are still slightly above the Fed’s target in core PCE terms. So, as I’ve been saying for a couple of weeks now, we should not expect more stock market gains, unless there are more real shocks.
I’m still working on some new metrics, including a new way to estimate equilibrium and mean expected NGDP growth, so stay tuned!
Note: This post, as is the case with all my posts, should not be construed as offering investment advice. Such advice should be tailored to the individual investor by qualified professionals who, ideally, are fiduciaries.
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