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Portfolio > Economy & Markets

BNY Mellon Q2 Outlook Moderately Positive

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“Drama” over the U.S. Budget, a “still problematic employment situation” and a ”still very depressed” housing market are not deterring a moderate growth pattern and expected “real GDP growth of 3% to 3.5% for 2011 and 2012,” according to the latest “Economic and Investment Strategy , 2011 Outlook—2nd Quarter Update,” from BNY Mellon Wealth Management.

Though “headline inflation” may tick up “due to rising gasoline prices” –it was 2.7%, year-over-year in March—the Outlook indicates concern for the “intermediate term” rather than short term. The Outlook opines that “deflation [is] no longer a worry,” due to the Fed’s quantitative easing goal of boosting inflation—to decrease the risk of deflation, and notes that while there is a “Core CPI of 1.2%” year-over-year in March, this is less than the Fed’s “target” of about 2%.


“Reduced supply from Libya” and other Gulf “geopolitical concerns” is pushing to price of oil up, but the report notes that “oil prices can backtrack” if conditions become more “calm” there.

Interest Rates

In the U.S., the “Fed must see employment situation improve to consider raising rates,” the Outlook says, adding that while the European Central Bank did raise rates in April from 1% to 1.25%, they don’t “have Fed’s dual mandate (price stability and maximum employment).”


The report says to expect the bull market to continue but “do not be surprised by pullbacks.” They expect “moderate gains…in 2011 and 2012,” making the case that at a price-to-earnings ratio of 15.5 for the S&P 500, is “still reasonable.”


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