Mid-Year Economic Update
Dear Clients and Friends,
We hope all is going great with you. We wanted to share an economic update with you as we head into July. As always, feel free to reach out to us anytime, the team is here for you...
In the past few years, there has been a tremendous number of headlines, market volatility, as well as interest rate hikes. Global markets have generally faired well and shown signs of resilience. The labor markets are also performing much better than expected recently. Inflation remains high, and a bit more persistent than desired by central banks worldwide. In response to this challenge, as we know, major central banks have implemented interest rate hikes over the past few years and expected into the future. We want you to keep in mind that one of our guiding principles has always been to enter the market with high quality investments at a low cost, over time; not timing the market, but having time in the market.
The sectors that are leading this year are technology, semiconductors, artificial intelligence (funds like IRBO, QQQ, etc., which have been a large majority of our portfolio, while value held up very well last year).
Despite the negative headlines, the US economy has had stronger than expected growth this year. The Commerce Department revised the annualized pace of Gross Domestic Product (GDP) growth to 2% for the January-through-March period, up from the previous estimate of 1.3%. This upward revision challenges the expectations of an impending recession. Another report indicates that layoffs have remained below expectations, indicating resilience in the labor market despite the Federal Reserve's 10 interest rate hikes totaling 5 percentage points. With that said, the United States’ mortgage rate has jumped to an average of 7% nationally and seems to be moving higher with another two rate hikes potentially coming from the Federal Reserve. So, a lot of negative headlines, but still a lot of positive news as well.
Furthermore, inflation has also started to peel backwards. The Federal Reserve is closely monitoring core Personal Consumption Expenditures (PCE) prices as an inflation indicator and is aiming to bring inflation back down to its target of 2%.
Federal Reserve Chair, Jerome Powell, recently expressed an optimistic outlook for the U.S. economy and downplayed the likelihood of a recession. Powell acknowledged the possibility of a recession but stated that it is not the most probable outcome. He emphasized the resilience and modest growth of the economy, highlighting the robustness of consumer spending and the labor market. Although labor market growth has slowed, Powell noted that this slowdown offers hope in the fight against inflation, as it indicates a decrease in pressure to offer high wages.
To be succinct, the current economic landscape remains challenging, uncertain, and although the risks of a recession are still looming, the global economy has most certainly shown signs of resilience. We continue to monitor the markets closely and adjust our investment strategies accordingly. Reach out anytime on the above commentary, or anything at all. Looking forward to speaking with you soon.
Best Regards,
Todd & the WealthScorz Financial Group Team
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
