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Q3 GDP Growth

Today, the Commerce Department announced that growth in the third quarter was slightly better than previously released, i.e., 2.6% versus 2.5%. It continues the stream of good economic news.

Growth in the first quarter was a whopping 3.7%, while the stock market was very bullish. Growth in the second quarter was a relatively sluggish (but still positive) 1.7%, and we saw a bear market.

With an accelerating rate for the third quarter and the stream of good economic news recently, I expect the fourth quarter GDP growth will be well over 3%.

Most analysts expect our GDP growth for all of 2011 to be about 3.5%. I listened to one this morning who expects 4.5% growth, which would be huge for us but puny compared to the 10% growth rates China and India have grown accustomed to.

With all the bullish news, it is not surprising that the Volatility Index has gotten quite low, suggesting the market is over-bought, which supports my expectation that the bear will return in late Winter or early Spring but won’t be here long.