It could be a long summer for the markets

It could be a long summer for the markets.

Next week, the Federal Reserve will meet, announcing its latest monetary policy decision on Wednesday. Currently, markets expect the Fed won't change its interest rate policy - keeping rates pegged near 0% - though the Fed could lay the groundwork for rate hikes at future meetings.

Following Thursday's retail sales report, economists on Wall Street noted that with the economy appearing to be back on track, we could be in for a long summer of Fed watching. In a note to clients on Thursday, Stephen Stanley, chief economist at Amherst Pierpont wrote that the latest retail sales report "inches the Fed one step closer to a September rate hike."

But by September, Stanley thinks the Fed, the economy, and the market will be itching for action from the Fed, writing:

"By the end of the summer, passing in June and lifting off in September is going to feel like missing your commuter train by two minutes and having to wait half an hour for the next one. June 17 is a little too soon to bring the doves on board, but September 16 (97 days and counting) is going to feel like an awfully long time to wait."

Stanley expects second quarter GDP growth will come in above 3%.

On Thursday, we noted that the Atlanta Fed's GDPNow tracker sees Q2 growth coming in at 1.9%, a bit below Wall Street's forecast of around 3% growth, though it's worth noting that this is a number that calculates GDP as data comes in, not a figure that, like Wall Street's numbers, projects future inputs.

In the first quarter, the Atlanta Fed was the big "winner," nailing the forecast of a well-below-expectations start to the year. And so the uptick in its outlook for the second quarter is garnering attention as folks look for signs that the long-awaited economic snapback is here.

Over the last few months, people paying attention to the markets and the economy have had a bit of a wild trip - going from an economy that looked fine, to one that looked like it could be heading into recession, back to an economy that appears to be shaking off a winter slowdown.

One could argue an economy growing right around its post-crisis trend isn't one the Fed needs to cool off by raising rates. Inflation, after all, is still running below the Fed's target.

But with a labor market that looks increasingly tight as job openings, jobless claims, payroll gains, and wage growth all continuing to strengthen - and a Federal Reserve that looks eager to raise rates at some point this year - each piece of strong data that rolls in solidifies the case to prepare, for the first time since 2006, for the Federal Reserve to raise rates.

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