The US popped over the 4% growth rate for the first time in 2 years according to friday's data. Inventories were a big part of the jump but C&I loan reports and corporate confidence may be the foundation of a quicker 2014. A funny thing happened while Wall Street's "brightest minds" focused on the minutia of Tapering....people and businesses got on with their lives.
We see 2014 as the Exit Path to Normal year. The Yellen Fed, conceived in Dovish background, will bog down in the fine tuning euphemism "Optimal Control." Promises about targets or time won't mean much to securities markets stretching pricing muscles atrophied by the heavy hand of QE. Our 2.20% call on the 5 Year Treasury (from last week's Minyanville Webinar) may turn out to be too low. The spongy floor the Fed is buttressing with The Death Star may need to be raised by this time next year.
As the ink dries on the supplemental chapters to The Central Bankers Handbook (and the tears dry on the timestamping, ranting policy bears faces), we expect some consequences to emerge. Air pockets and periods of loss of function will become more common. The 2013 Spring Swoon was an omen not an anomaly. The health care overhaul will finally be trackable.
Its been 2 years since the US has grown at this speed, however historically modest. Its been 5 since the Credit Super Cycle cracked. At long last, people are looking forward instead of back.