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The Value Line View, which can be found inside the Selection & Opinion section of the well-known Value Line Investment Survey™, discusses the current business environment, and analyzes the economic and interest rate trends as they can affect the stock market. Since many investors and financial professionals incorporate analyst opinion into their current investment strategies, we’ve made The Value Line View available to you as an added value.

 

Economic and Stock Market Commentary

The nation's economy is clearly holding its own as we move through the early weeks of 2017. In fact, in certain respects, things look better now than they did three months ago. To be sure, gross domestic product growth did slow from the third to fourth quarter, with respective increases of 3.5% and 1.9%. However, the third-quarter gain was inflated by a surge in exports and a pickup in federal government spending--neither of which was sustained in the final three months of the year. All told, if we exclude the export component from both periods, GDP growth would have been in the mid 2% range in each quarter. Importantly, even as headline growth slowed, the contributions from residential and nonresidential construction rose nicely, while personal spending held its own. As such, core components of the expansion remained in place as a new year began.

There seem to be more tailwinds than headwinds in place. On point, recent years have seen the economy run into opening-period difficulties, most often from weathe-related issues, and in 2016 from falling commodity prices--notably oil--as well. This year, the first quarter began with a prevailing wind at the economy's back. To wit, energy sector capital investment is rebounding following sizable reversals a year ago, as the rig count is climbing again. Moreover, buiding permits and housing starts are holding up nicely; non-defense capital spending is rising; and consumers buoyed by gains in dispoable income and household wealth, remain supportive. Finally, the jobs outlook is brightening, with the January employment tally up strongly. All of this, along with record-high stock prices and sharp increases in the leading indicators, suggests that first-quarter growth could exceed 2%. At this point, only excessive inventories figure to be a material problem early in the year. But the current drawdown in such stockpiles could be a boon to output later on in 2017.

Growth should accelerate modestly over the balance of this year and into 2018. The supportive trends cited above, along with... Continued in March 3, 2017 Selection & Opinion, p. 3096.

 

 

 

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