Faster job growth, consumer confidence (albeit volatile recently) and lower energy prices will boost US growth in the 3Q (+3.2%) and 4Q (+3%) this year. Inflation adjusted consumer spending will grow 2.6% in the 2H this year, helped by lower energy prices (by 13bp in the 3Q and 21bp in the 4Q).
Oil prices are expected to close 2014 at $91.16, down $9 from June predictions. Inflation expectations are consequently lower, expecting annual CPI growth of 1.9% by year end.
Employment growth will average 214,000 over the next year, (227,000 current year average). Therefore unemployment will finishing the year at 5.8%, then finish 2015 at 5.4%.
The only headwind to growth lies internationally as Europe and Asia slow, while a stronger dollar curb US exports. That and some hesitation to higher interest rates… but higher rates only come when the economy is strong enough to support them.
THE TRADE (risk off) buy dollar, treasuries and sell Euro, Yen, commodities, small-caps and emerging markets. Buy domestic large caps with little international exposure. Dollar vs. Ruble looks perfect.