in Second Half of 2009
January 20, 2009
Greg Valliere, Chief Political Strategist at the Stanford Group and frequent contributor to CNBC, unabashedly admits he is an optimist. Speaking to a group of over 100 wealth managers at the Fortigent Winter Forum on January 16, Valliere said he expects the economy to recover by mid-2009, with positive GDP growth over the second half of the year.
Shrinking yield spreads, surges in mortgage refinance applications, and lower energy prices all bode well for a sooner-than-expected turnaround, Valliere said.
“This is a great time to be the incoming President,” he said. “The bar is set really low, and January 20 could be the bottom of the recession.”
Valliere was bearish throughout 2008, he said, adding that he has seen “nothing like this in the markets in my entire career.” But steps necessary for economic recovery have been taken. They fall into four broad categories.
First, Valliere is pleased with the Fed’s aggressive monetary policies, and he’s confident they will continue. “For Ben Bernanke and Larry Summers, money is no object,” he said. Valliere expects the Fed to broaden its mandate in terms of the securities it will purchase from the private sector, and he expects the Fed Funds Rate to remain at zero throughout 2009.
On the fiscal side, Valliere expects the Obama administration to push forward with its $850 billion economic stimulus plan, and he predicted that the price tag would eventually approach $1 trillion. The plan, he noted, includes tax cuts to “finesse” Republicans, money for states, expanded unemployment benefits, and the highly-trumpeted component – infrastructure spending – which will not be limited to highways and bridges, encompassing in addition funds for alternative energy, broadband capabilities, and school renovations.
Third, on the housing side, Valliere expects new action to stem foreclosures now that Citibank has opened the door to bankruptcy relief for homeowners. Valliere expects to see liberalized tax credits and congressional action to guarantee Freddie Mac and Fannie Mae loans.
Lastly, Valliere cited a number of “ephemeral” reasons for his optimism. Obama takes office with an 80% approval rating, coupled with “something that money cannot buy – an adoring press,” he said. Valliere didn’t forecast whether such confidence will persist, but believes it is necessary for the time being to overcome an “angry” retail investor sentiment.Display article as PDF for printing.
Would you like to send this article to a friend?
Remember, if you have a question or comment, send it to .
