This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Will Strengthening GDP Boost Bank Rates In 2013?





There have been several pieces of positive economic news lately, but perhaps the most significant was the upward revision of estimated third-quarter economic growth. Could this be an early sign that 2013 will bring higher bank rates?

The overarching context is that stronger economic growth is needed to support higher bank rates. It certainly helps that the Bureau of Economic Analysis increased its estimate of third quarter real GDP growth, from a 2.0 percent to a 2.7 percent annual rate. That revised rate is more than twice the second quarter's growth rate of 1.3 percent.

There are several events in the upcoming weeks that may help determine whether this GDP result was just a flash in the pan, or really the start of something good for the US economy:

  1. December 11 and 12, 2012: The Fed meets. The Fed is not likely to overreact to the improvement in third-quarter GDP, so expect it to maintain its current emphasis on low interest rates. Under the circumstances, the most positive outcome of this meeting would be a business-as-usual type of report, with no new cautions about the economy or the financial system.
  2. December 20, 2012: Third estimate of third-quarter GDP. Another upward revision is probably too much to hope for, but simply confirming the latest estimate of the third quarter's improvement would be a positive development.
  3. December 7, 2012 and January 4, 2013: Employment reports. There was some controversy about the positive employment report that came out just before the election, so it will be especially interesting to see if decent job growth can be sustained. The wild card, though, is that these will be the first monthly employment reports impacted by Hurricane Sandy.
  4. January 30, 2013: First estimate of fourth-quarter GDP. If the third-quarter estimate proves to be real, then it's a question of what the economy does next. Will it improve on that 2.7 percent growth rate in the fourth quarter -- or slip back down yet again?
  5. Ongoing: The fiscal cliff negotiations. Both sides may feel compelled to demonstrate some brinkmanship for political purposes, so don't be surprised if these negotiations go right up to the January 1 deadline -- or beyond. Once a deal is announced, watch the reaction of the stock and bond markets to see how credible investors consider the solution to be.

In recovering from the Great Recession, the economy has shown occasional flashes of promise, but has not been able to sustain a healthy rate of growth. Positive outcomes to all of the above milestones -- especially the fiscal cliff negotiations -- could be enough to give the economy some sustainable momentum.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs