Durables Miss In Big Way
The slow growth/low inflation story gained additional traction Tuesday when durable goods orders came in well below expectations. From The Wall Street Journal:
U.S. businesses broadly cut capital spending in the final months of 2014, raising red flags about the economy's ability to sustain momentum amid troubles around the globe. Orders for durable goods -- products like cars and kitchen appliances designed to last at least three years -- fell 3.4% in December from a month earlier, the Commerce Department said Tuesday. Orders have fallen four of the past five months.
Bonds Win In Two Of Three Scenarios
From an investment perspective, there are three major scenarios likely facing investors. Scenario one is an ongoing period of slow growth and low inflation, which can be favorable for both stocks and bonds. Scenario two, slower growth, has gained some momentum with the recent trends in earnings and economic data. Scenario three involves a stronger economy and a shift toward higher inflation. You can see a larger and economically-broader version of the flow diagram below via this link.