Image from Bloomberg.com
This article runs against most of the things I said about what can happen to the stock market in the near future; maybe the optimists among you can use this to justify holding on to your investments, or even buying additional shares. However you would want to use this article, remember that it comes from Abacus Securities Corporation, a brokerage firm that makes money from transaction fees in buying and selling stocks.
The brokerage firm cites strong economic fundamentals like the currently high consumption levels as the primary basis of the optimistic outlook. “Government consumption expenditure usually plays the dominant role during the first half of an election year, with election spending contributing the bulk of the economy’s output,” it said. “The year’s first quarter GCE figure does not disappoint on this end, growing by double digit at 18.5 percent compared to the same period in 2009.”
Abacus goes on to say that while the recovering consumption level was a “welcome development,” we should expect government spending to decline in the coming quarters. “With the absence of election spending, and as the deficit-to-GDP ratio has neared historical highs, government-funded economic stimuli may no longer be sustainable over the long-term,” it said.
Meanwhile, personal consumption expenditure returned to pre-crisis growth levels, having been boosted still by the continued growth in remittances and supported by employment generation during the quarter, Abacus added.