The economy's “report card” is in, and the results are more of the same. The U.S. economy grew 2.6% in the second quarter (April through June). So, for the first half of 2017, the economic growth rate is 1.9%. This is in line with the five-year average growth rate of 2.2%.
Growth was once again driven by spending from you (the consumer), climbing 2.8%. This report does not impact Simply Money Advisors’ outlook on the economy. We continue to see growth for all of 2017 around 2% (or slightly higher) with very little risk of a recession. And this will allow Wall Street to continue to focus on corporate profits, which have been strong so far as we are about 60% through “earnings season.” Of the larger companies that have reported (like Procter & Gamble and Amazon), 77% have reported better earnings than analysts were expecting and the earnings growth rate is a solid 10.5% on average.
The Federal Reserve, our nation’s central bank, met last week, and as Simply Money Advisors expected, short-term interest rates were left unchanged. The Federal Reserve did state that they expected to begin to shrink its balance sheet "relatively soon," which could mean September or October. The Federal Reserve's balance sheet consists of $4.5 trillion of bonds that were mostly bought during the financial crisis. The purpose of these purchases was to encourage economic growth in the time of crisis. Because the economy is no longer in a state of emergency, the Federal Reserve believes it should modestly reduce the number of bonds it owns. Simply Money Advisors believes there is a good chance the Federal Reserve raises short-term interest rates in December, but that will happen only if inflation rises from its current 1.4% level.
This week promises to be another busy economic week. Wall Street traders will be watching for reports on the services and manufacturing sectors. They will also pay close attention to the jobs report released on Friday, August 4th. Economists are expecting the unemployment rate to drop back down to 4.3% with about 180,000 new jobs added in July.
The Simply Money Point
While Wall Street traders will be watching these individual data points, investors like you should be looking at the big picture and how it affects your personalized financial plan. With little risk of a recession, a stable economy, and strong earnings growth, Simply Money Advisors believes the investment portion of your personalized financial plan will help you meet your financial goals.