Fri 4/27/12 4:33 PM — Stock Outlook, GDP #s

U.S. stocks finished the week up roughly 3% on the S&P 500 index, more on the Nasdaq and small stock indexes. That gained back most of the decline so far in April. Europe was up a similar amount, Asia generally finished a little lower this week.

For the week other investments of note were:
Gold +2%
Oil +2.7%
Bonds (corporate high quality) +0.2%
Natural gas was up almost 10% Thursday but finished the week up 6%

Economic output (GDP) for the U.S. in the 1Q was reported today at 2.2%, which was lower than expected. However, real demand was better than expected so really the report was OK. Inflation came in around 2%.

Growth of just over 2% is OK in our current relatively slow growth world as people recover from the financial excesses of the 80s, 90s and early 2000s. Of course, the federal government continues to ramp up its debt by huge amounts.

Because this is a fairly slow growth world, the stocks of fast-growing companies have attracted most of the investment money so far this year and have far outpaced slower, more conservative companies. So, growth-oriented mutual funds have done better than those investing using a value strategy.

The next month or so should mainly be dominated by news out of Europe (so what else is new?). Of course war between Israel and Iran would be a big deal if that comes about. U.S. economic news is likely to be slow and steady.

I don’t see a large risk of significant declines (15% – 20%) in either the stock market or bond market right now. Setbacks of 5%-10% happen sometime in most years and are not easy to predict so I wouldn’t let that impact your investing this quarter.