re: U.S. Economy Is Better Than People May Feel: Cohn

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Better Than People May Feel

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That's the key phrase. It's all relative, right?

I like Gary Cohn, but if you listen closely to what he said, he's not exactly painting a rosy macroeconomic picture. He puts too much Keynesian emphasis on the stability of consumer spending and the theory of beggar-thy-neighbor monetary policy for my tastes, but generally speaking, I think he's on target. But if on target means predicting yet another year of real U.S. GDP growth in the 1.5-2.0% range, then that's plain abysmal given where we are now relative to 2007... or 2000 for that matter.

So while I agree that his 1.5-2.0% range sounds reasonable to me, this in no way contradicts the notion that, in the realm of U.S. equities, we are in the midst of a corporate earnings recession that has yet to be priced into the market. I also think that in terms of asset price evaluations, he is toeing the way-too-bullish corporate line from Goldman Sachs. As I noted in a post about a month-and-a-half ago ( LINK), GS is really sticking their necks out on the chopping block here. I think they've been giving their big client investors some very bad advice lately.

oil research -- $200/barrel
Jan Hatzius -- need I say more?
Abby Joseph Cohen -- S&P 500 closes above 2,100 at 12/31/2016, and U.S. equity markets were just being "overly emotional" in January
David Cohn -- the drop in oil was "confusing" investors in January
equity research -- $120 EPS projections for 2016

Now it may be that Goldman Sachs is right about the bullish case they're selling investors asserting that U.S. equity prices will keep rising past 2,100 this year. I still think the market will drop below 1,800 this year, and even if it doesn't, I certainly don't think $120 EPS projections will hold up in a year of sub-2.0% GDP growth in the U.S., and even worse news from the rest of the world's economies.