Wall Street has quickly turned its attention to the escalating tensions in North Korea where the rogue nation fired a missile directly over Japan, and they also appeared to have successfully detonated a hydrogen bomb. Yet so far, there has been minimal reaction in both the stock and bond market because Wall Street does not believe this will escalate to anything that affects the global economy.
North Korea's goal seems to be international respect and a lift of economic sanctions. Barring a serious misstep, the mostly likely scenario is that North Korea's economic sanctions are reduced over time and there is no nuclear war. It's unlikely that these political tensions will have a material impact on your personalized financial plan. There could be some short-term market uncertainty, but markets over the long run will be more affected by the economy and corporate profits here in the U.S.
Last week's data showed the American economy grew at a 3% pace in the second quarter (April, May, and June). This was a significant upward revision from the original 2.6% estimate. The improvement can mostly be traced to stronger consumer spending, which is spending by you. Simply Money Advisors expects consumer spending to continue to be healthy due to the current robust job market. We believe the U.S. economy will grow around 2.5% for the second half of 2017, and we could see the economy growing around 2.25% for all of 2017.
There are some outside forces that could help our economy and corporate profits grow even quicker next year. For example, President Donald Trump began to campaign heavily for tax reform last week. He is looking to reduce the number of tax brackets for individuals and reduce the top tax rate for corporations.
Other big economic news last week was the jobs report for August. The report was slightly weaker than expected as 156,000 new jobs were added (180,000 were expected) and the unemployment rate rose to 4.4% from 4.3%. However, the August jobs report has a history of being revised higher.
The Simply Money Point
Despite the media noise about the political tensions in North Korea, investors like you should continue to feel confident in your personalized financial plan. And with talks of tax reform around the corner, a cut to corporate taxes could cause profits to increase, meaning stock prices may rise and this would be beneficial for the investment portion of your financial plan.