ACCELERATION

• The economy shrank slightly in 4Q12, but seemed to recover by year-end

• Economic data releases point to acceleration

• Healing of the housing sector continues

• Job creation continues at a steady, but clearly inadequate pace

• Some of the global risks have faded, at least temporarily

• Equity markets buoyant in January across the board, with key indices nearing record levels

Fourth Quarter Disappointment: Despite the slight contraction of output experienced in 4Q12 (GDP unexpectedly fell by 0.1% annualized); the economy seems to have been on an accelerating path in the past two months. Equity markets are nearing all-time records, the housing market’s recovery shows evidence of being on a more solid footing and manufacturing is rebounding. Meanwhile some of the major global risks that hobbled the economy have faded, at least temporarily. The US economy could be reaching escape velocity, and finally breakout into more rapid growth than the 2-2.5% average of the last three years.