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Investing Specialists

Economy Not Up to Fed's Expectations

Increased Fed economic forecasts of just last week already look embarrassingly high.

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It was another volatile week for the Dow and the S&P 500, with Monday and Friday showing meaningful down drafts related to the Fed possibly starting to taper bond purchases as early as September. Meanwhile, China worries about tighter credit, falling purchasing managers reports, and the slowing growth rate didn't help matters, either, especially on Monday. (Later in the week it looked like China's central bank was backing away from its laissez-faire stance toward the most recent liquidity crisis, especially after a 5% stock market decline.)

In between the two big Fed-related days, some of the economic indicators, especially first-quarter GDP growth, came in slower than expected, prompting hopes that just maybe the Fed wouldn't be tapering after all. At a minimum, increased Fed economic forecasts of just last week already look embarrassingly high.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.