2013 Economic Outlook & Implications for Stocks

Folks,

We are rushing off to meet some friends for New Years, but I wanted to republish the following video from Well’s Fargo.  It is a discussion with a couple of economists on the bank’s economic views for the U.S. in 2013.  I wanted to get out there for a couple reasons.  First, the internet is full of crazy. So, its good to get information that is more responsibly thought through than a lot of the wacky stuff floating around on the web.

Second, its a good starting place for thinking about stocks in 2013. The video has a couple of conclusions which are worthy of note:

First, U.S. GDP growth is projected to be weak – between 1.5 and 2.0%.  This suggests that the overall market (e.g. index funds like the S&P 500 and Russell 2000) is going to see moderate to weak growth.  This is because the stocks that track these indexes are often larger (think GE) and may have growth limited by the overall progress of the economy.

Second, the Eurozone and China appear to be recovering.  Chinese GDP declines seem to have leveled off, and exports from Spain and other Euro countries appear to be mildly increasing.  This suggests that the shipping industry should seem some improvement in overall business conditions.  This is becuase shipping moves exports around and they benefit when exports increase.

Third, taxes are going to take a bite out of consumer spending.  Wells Fargo is forecasting a moderate decline in consumer spending overall due to the impact of higher levels of planned Federal taxation.  So, if you are long stocks which rely heavily on consumer spending you might consider a evaluation of your positions.  This means outfits like Proctor & Gamble, Johnson & Johnson and Kraft foods should suffer.

The video is below, its six and a half minutes. Worth a look to get a decent opinion about where the U.S. is going in 2013.