Salient to Investors:

The economic expansion shows signs of lasting almost twice as long as average, with few of the excesses that often presage the start of contractions – inflation is slowing, not quickening, household debt is shrinking, not expanding, and the labor market is slack, not tight.

Robert Gordon at Northwestern University said the expansion last another 4 to 5 years.  (Which would make it the second longest on record, behind the 1990s and versus the average since the end of WWII of 58 months.) Gordon said the cyclical outlook is bright, but the US will be hampered longer term by an aging population, a plateauing of educational achievement, and increased inequality. Gordon said past expansions often were cut short by Fed tightening credit – in 1957, 1960, 1980, 1981 and 1990 – while many previous cycles ended because of too much exuberance in both residential and nonresidential construction – a major cause of the 1929-33 Depression and in 2007-08. Gordon said fortunately during 2008-13, the US is ‘constructing fewer homes and cars than replacement needs.

Allen Sinai at Decision Economics said the S&P 500 may rise to 1,750 in 2013 and 2,000 in 2015.

Goldman Sachs expects economic growth of 2.9 percent in 2014 and 3.2 percent in 2015 versus 1.9 percent in 2013. Jan Hatzius at Goldman said we could see a good growth environment for a long time.

Mark Zandi at Moody’s Analytics said there are no significant imbalances in the private economy, which is in good shape, though possible shocks could knock the recovery off course, including a collapse of the stock market, a sudden spike in long-term interest rates, or a military confrontation between the U.S. and Iran that drives up oil prices. Zandi said policy makers would be hard-pressed to cope with the fallout of a sudden shift because short-term interest rates already are near zero and the budget deficit is still high by historical standards.

Robert Hall at Stanford said the labor market is still very weak so we have a long way to go before any excess will appear in that most important of all markets.

Itay Michaeli at Citigroup recommends auto shares because consumers have been deferring purchases and we are still very early in the auto-sales cycle – he forecasts sales of cars and light-duty trucks will rise to 16.5 million in 2015 from 14.5 million in 2012.

Maury Harris at UBS Securities said younger adults have the most ability to spend after some delayed striking out on their own by living with parents or friends, so housing starts could rise to 1.1 million units in 2013 and 1.35 million units in 2014 versus 781,000 in 2012.

Joseph Carson at AllianceBernstein see many positives and expects another 3 to 4 years of economic growth at least.

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