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Wesbury: The Economy Is Much Stronger Than the Media Says

Posted Jul 22, 2009 09:51am EDT by Aaron Task
Related: ^DJI, ^GSPC, SPY, DIA, TLT, XLF, TBT
There's a growing consensus the economy will start growing again later this year but 2010 will be characterized by subpar growth. That consensus is wrong, according to Brian Wesbury, chief economist at First Trust Advisors, who believes there will be a V-shaped recovery.

"If you're optimistic today people look at you like you've got three eyes," Wesbury jokes. But as detailed in a recent Forbes column and the accompanying video, he predicts real (i.e. inflation-adjusted) GDP will be 3.5% in the second half of 2009 and 4.5% in 2010, based in part on the following:

  • A "super easy" Fed and increased government spending (remember, the bulk of the stimulus package hits next year and 2011).
  • The end of the panic in credit markets, leading to an increase in the velocity of money.
  • A pending bottom in home building, continued declines in the trade deficit, a return (albeit modest) of consumer spending and improving business inventories.

By his own admission, Wesbury was too optimistic heading into 2008 and so you might chalk this up to him being bullish by nature. Still, he makes a compelling case that a lot of powerful interests - from liberals hoping for more government spending to conservatives seeking to criticize President Obama to short sellers and (yes) the media - have incentives to put a negative spin on the economy, rather than a positive one.

It's something to think about because if we can count on anything, it's that the consensus will most likely be wrong.

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