Uncertainty in the markets is the common denominator so far in 2015. Uncertainty about oil, uncertainty about interest rates, and uncertainty about growth all contribute to the extreme volatility the market is experiencing. But, there is one certainty. Investing in these two undervalued blue chip stocks that are free cash flow machines is a must for every investor.
Recent economic readings have been a bit disappointing of late. Especially discouraging has been a Q1 GDP report that showed the economy grew at a miserly 0.2% annual rate in the first quarter of the year. Trade data last Tuesday showed the trade deficit for March was worse than expected at over $50 billion as the strong dollar curtailed exports. Based on this, Goldman Sachs (GS) has projected first-quarter growth will actually be revised down to a -0.5% annual rate when all is said and done.
This puts the 3.5% GDP growth predicted for the U.S. economy by the International Monetary Fund and myriad economic forecasters at the beginning of 2015 deeply in doubt. The Atlanta Fed, which has been right on the money recently projected they are seeing just under one percent GDP growth for the second quarter based on limited economic readings out of April so far.
Why this tepid growth is a surprise to pundits and investors is a bit of a puzzle to me and I actually made a $1,000 bet with a friend and hedge fund manager at the beginning of the year that the domestic economy would grow at three percent or less in 2015. This would be the ninth year in a row that the economy would deliver below trend growth. My reasoning was that with the rest of world continuing to show tepid growth and quantitative easing by the Federal Reserve now over it was hard to see a clear path to robust growth. If the economy couldn’t grow at three percent or better in the six years that the Federal Reserve was pumping extraordinary liquidity support into the system how is it going to deliver that sort of growth with those programs being concluded?