The U.S. economy has shown a remarkable resilience despite recent global turmoil. Negative global impacts over the past few years include the Greece debt crisis, the 20% appreciation of the trade-weighted dollar, the slowdown in China’s growth, the financial turbulence in early 2016, and the recent Brexit decision. With countries and economies becoming more globalized, events around the world can impact our economy.
The resilience of our economy provides a certain level of comfort for us. For example, the aforementioned critical events could have put a damper on the U.S. economy, yet we have still shown positive results in many sectors, including strong U.S. job growth along with increasing wages, a robust housing market, high consumer confidence and consumer spending, along with a stabilizing manufacturing sector.
The strength of the U.S. economy has also impacted U.S. and world equities. Many of them have reached or are nearly at all time highs. This along with the strengthening of the U.S. dollar reduced the demand for precious metals as a safe haven.
[When?] The Central bank vice chairman, Stanley Fischer, voiced optimism about the U.S. economy and the near-term pick up growth in the coming quarters. With this, it seems the conditions are slowly being met for a possible increase in interest rates, with the exception of one key area, the inflation rate.
The U.S. inflation rate has been just under the Fed’s 2% target for several years. The Fed would ideally like to see some improvement in the inflation rate before increasing interest rates. Current conditions indicate inflation may soon be on the rise.
On Friday August 26th, Fed Chair Janet Yellen also voiced optimism about the U.S. economy and expectations that interest rate hikes are ahead. She pointed to the continued strength of the labor market and the recent uptick in inflation.
If you would like to know more about how the state of the economy, inflation, and interest rates impact your investments, please give one of our Wealth Management professionals a call.
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