Good news for corporate profits and your financial plan


This Friday, July 28th, we’ll get the economy's ‘report card’ in the form of the latest Gross Domestic Product (GDP) number for April through June. The GDP is the value of all goods and services produced during a specific period of time. Economists expect that spending from you, the consumer, improved enough to push economic growth to 2.5%, which would be better than the first quarter's 1.4% growth rate. However, it's still not as strong as most were hoping for a few months ago. Simply Money Advisors expects that the U.S. economy will grow around 2% (or slightly higher) for the 2017 calendar year.

The other big economic event this week is the Federal Reserve's meeting on Tuesday and Wednesday. The Federal Reserve is our nation’s central bank. Recent comments from Federal Reserve officials suggest the committee is concerned about the lack of inflation in the economy, meaning it will likely decide to keep short-term interest rates unchanged. The Federal Reserve’s preferred inflation measure is only 1.4% higher over the past year, and that is well short of its 2% inflation target. The Federal Reserve will not want to raise short-term interest rates quickly because higher interest rates could cause the already low inflation to be even lower. Simply Money Advisors believes that if the Federal Reserve raises interest rates again, it will likely be at the December meeting. The Federal Reserve will want to see if inflation improves before they make any more interest rate moves.

Another announcement to watch from the Federal Reserve is what they say about their ‘balance sheet.’ During the 2008 financial crisis, the Federal Reserve bought trillions of dollars of government and mortgage bonds in order to encourage bank lending and, ultimately, economic growth. Now the Federal Reserve is looking to slowly (over many years) reduce the number of bonds they are still holding. At this week's meeting, the Federal Reserve may announce plans to begin this process in the fall.

During this very busy week, Wall Street will also be focused on corporate profits. We’re about 20% of the way through earnings season, and the initial results are promising. So far, about 77% of large companies have reported sales that were better than Wall Street analysts were anticipating, and 82% reported better-than-expected profits. There are 182 large companies reporting this week, including Alphabet (formerly known as Google), Facebook, Amazon, Ford, Exxon Mobil, UPS, and Cincinnati-based Procter & Gamble.

The Simply Money Point

With corporate profits out performing expectations, investors like you should continue to feel confident about the economy and your investments. Despite the media noise, stay on track with and keep following your personalized financial plan.