This is an exciting time to be an investor, but it’s also a very uncertain one. Risks to both the upside and downside are much higher than they were even a year ago.
The June 14 Fed policy decision was expected to overshadow the mid-month economic figures. Instead, the soft data reports contrasted with the relatively more upbeat central bank. Did the Fed make a mistake? Or are the financial markets placing too much emphasis on the short-term data?
The market odds of a June 14 Fed rate hike have risen in recent weeks. Another 25-basis-point increase in short-term interest rates is seen as a near lock.
The global economy continues to expand, corporate revenues and earnings are solid and, despite frothy valuations, the stock market continues to chug up “to 11” and beyond.
Investors need to be vigilant, as stocks and bonds are expensive, volatility is low, and risks lay ahead.
Political noise emanating from Washington has prompted fresh concerns that a US equity market correction may be looming. But have no fear: the market often takes a leg down, only to bounce back quickly.
Following the election, stock market participants gained optimism on the view that the new administration would push through a reduction in regulations, sharply boost infrastructure spending, and achieve broad tax reform.
Growth in nonfarm payrolls rebounded in April, following a soft increase in March, consistent with a longer-term downward trend. The unemployment rate fell to 4.4%, the lowest level in over a decade.
After years of relying on monetary policy to stabilize the U.S. economy, policymakers have redoubled their commitment to stronger pro-growth fiscal policies. As post-election Washington sets its sights on growth-oriented reforms, policymakers should remember that economic growth in any nation is determined by the four basic factors of production—land, labor, capital, and entrepreneurship.