We also got our first look at fourth-quarter economic growth, which showed that the economy grew at a lukewarm 0.7% pace in the final months of 2015. Low consumer spending weighed on growth, suggesting that Americans are pocketing gasoline savings instead of spending them.3 We certainly can’t fault folks for financially prudent behavior, but consumer spending accounts for 70% of economic activity. While we can attribute some of the slow economic growth to seasonal factors like an unusually warm winter, analysts will be closely watching data releases in the weeks ahead for signs of deeper weakness.
After meeting for the first time in 2016, the Federal Reserve declined to raise interest rates last week but gave no indication that it intends to abandon rate hikes later this year. Predictably, talking heads exploded on all sides. Some believe that the Fed made a mistake by not raising rates and giving markets more confidence in the economy. Others believe that the Fed is being appropriately cautious given the market turmoil and concerns about economic growth. What’s clear is that the Fed is telling investors: “We’re aware of the uncertainty and we’re keeping an eye on many indicators.”4
After meeting for the first time in 2016, the Federal Reserve declined to raise interest rates last week but gave no indication that it intends to abandon rate hikes later this year. Predictably, talking heads exploded on all sides. Some believe that the Fed made a mistake by not raising rates and giving markets more confidence in the economy. Others believe that the Fed is being appropriately cautious given the market turmoil and concerns about economic growth. What’s clear is that the Fed is telling investors: “We’re aware of the uncertainty and we’re keeping an eye on many indicators.”4
Bottom line: In our view, market volatility will remain with us for the foreseeable future.
Best Regards,
Kevin Kroskey
This article adapted with permission from Platinum Advisor Marketing Strategies, LLC
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3 http://www.foxbusiness.com/markets/2016/01/29/weak-4q-gdp-temporary-dip-or-is-u-s-recession-bound.html
4 http://www.cnbc.com/2016/01/27/the-fed-holds-rates-unchanged.html
5 http://www.foxbusiness.com/markets/2016/01/26/consumer-confidence-edges-up-in-january.html
6 http://www.cnbc.com/2016/01/28/market-reacts-to-sharp-decline-in-durable-goods-orders.html
7 http://www.foxbusiness.com/markets/2016/01/28/weekly-jobless-claims-fall-by-16000.html
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3 http://www.foxbusiness.com/markets/2016/01/29/weak-4q-gdp-temporary-dip-or-is-u-s-recession-bound.html
4 http://www.cnbc.com/2016/01/27/the-fed-holds-rates-unchanged.html
5 http://www.foxbusiness.com/markets/2016/01/26/consumer-confidence-edges-up-in-january.html
6 http://www.cnbc.com/2016/01/28/market-reacts-to-sharp-decline-in-durable-goods-orders.html
7 http://www.foxbusiness.com/markets/2016/01/28/weekly-jobless-claims-fall-by-16000.html
