Weekly Impressions - Light at the end of the tunnel for corporate America?
In a post from December 2015, Evidente drew on comments from the Federal Reserve suggesting that the normalisation of the federal funds rate was likely to follow a more gradual and shallower path than past tightening cycles. Overnight, Federal Reserve Chair, Ms Janet Yellen re-iterated that the new normal for policy normalisation would be low and slow, based on growing evidence that the neutral rate of interest remains around zero. The substantial downgrade to sales growth expectations for the S&P500 companies in the past year has been associated with significant US dollar appreciation and an effective tightening of policy over this time, which has contributed to the pull-back in GDP growth expectations to around 2.5% for this year and next. If the Fed Chair and Governors continue to bang the drum on the new normal of low and slow policy normalisation, the key barometer of success will likely be a welcome and much needed improvement in corporate America's sluggish revenue conditions and operating performance. (VIEW LINK)