The Federal Reserve has two primary mandates: maximizing employment and stable prices. Congress also included moderating long-term interest rates as part of the Fed’s overall objective, but that should be the offshoot of stable prices. In May the unemployment rate fell to 3.8% which is the lowest since April 2000.
It seems that after years of expecting inflation to rise to its 2.0% target the Federal Reserve and manyeconomists have concluded it’s just not possible. The reasons most often cited are the Amazon Affect,Artificial Intelligence, weak wage growth, years of excess capacity, and transitory factors like the mobile phone price war in March 2017.
GDP growth slowed in the fourth quarter to 1.9% down from 3.5% in the third quarter. Both numbers were skewed by trade data. Third quarter GDP was lifted by .7% from the export of soybeans to South America, while imports shaved -1.7% from fourth quarter GDP.
Throughout history banks have been at the epicenter of every financial crisis. That notoriety of failure led to the formation of Central Banks. In the wake of the 2008 financial crisis, global banks have repaired and strengthened their balance sheets, especially in the U.S.
During the 35 year secular bull market that began in October 1981, there were a number of sharp increases in yields in which bond prices fell. But investors who held on were bailed out by the secular bull market and eventually recovered all the losses and with gains to show for their patience.
China’s GDP rose 6.9% in the first quarter, but is a slowdown coming? Emerging Markets have been on fire this year, will the rally continue? U.S. GDP is forecast to grow to 3.5% in the second, but could the delay in tax cuts dampen the rebound?