Perhaps economists are finally coming to grips with the long-awaited reality of the “new normal”.
This after another report comes in from a Wall Street firm — this one from Stephen Roach, chairman of Morgan Stanley Asia (Stock Quote: MS) — that concludes slower economic expansion over the long haul is a fact of life.
Roach estimates that global economic growth should average 3.25% to 3.5% during the next five years. That’s more than a full point below the 4.8% growth average the world economy saw prior to 2008.
We’re seeing more and more reports like Roach’s and that’s probably a good thing for bank rate investors to hear.
After all, once we learn to live with the fact that long-term economic growth will be lower than we’ve been accustomed to, we can finally push the reset button and figure out what kind of rates of return we can realistically expect on bank rate investments.
That’s not to say investors will have to live with the current abysmal levels of bank interest rates we’re seeing right now. But the interest rate market will rise, sooner or later, and when the dust clears bank rate investors will know where they stand for the long haul.
Yes, it’s a process, if not an ordeal, but there are some indicators that the turnaround in bank rates, even if it’s not as strong as we had hoped, isn’t so far off. One recent positive indicator is the fact that the stock market has had a good month in July. Back in the first week of July, the Dow Jones Industrial Average was languishing down at the 9,700 level. But as of July 27, the index has risen to 10,530. The stock market has been fueled, in part, by Reuters report that 83% of S&P companies are reporting quarterly financial numbers ahead of expectations.