Bear Stearns: Economic Bull

David Malpass, Bear Stearns chief economist today:

"Upside Breakout on the Horizon? It's more likely than not."

"Some economy watchers have been looking for a slowdown, but a speed-up is more likely. Right now the U.S. is in the early to middle stages of a long, durable, and relatively fast expansion, one that has positive implications for U.S. and foreign equities (but not for bonds). The growth engines include the dollar's exit from deflationary territory in 2002, low interest rates, the 2003 tax cuts, and the increasing level of U.S. employment."

"Except for the third quarter of 2003 when GDP grew at 7.5 percent, annualized quarterly growth has been between 3.3 percent and 4.5 percent for each quarter since the second quarter of 2003. In all likelihood, growth for the fourth quarter of 2004 (soon to be revised) and the first quarter of 2005 will fall within that range.When the U.S. breaks out of that range, it is more likely to be toward the high side than the low side. The U.S. economy will probably register a 5 percent growth quarter before it turns in a 2.5 percent quarter. Why? Huge levels of liquidity, low inventories, unabated monetary and fiscal stimulus, a solid household balance sheet, robust investment activity, and continued strength at retail are all part of today's economic story. This is the stuff of accelerations, not slowdowns."