Each quarter, the Pinnacle team will share an overview of notable economic changes and projections for the future to help you keep tabs on your portfolio.
With summer in full swing, the United States economy is experiencing slow and steady growth. If fundamentals, such as corporate earnings, remain healthy, this growth will likely continue through the year’s end. Industry pundits expect the stock markets to be volatile but generally on an upward trend as trade tariffs, interest rates, and international affairs (e.g. Brexit) dominate the headlines.
From our perspective, here’s what you need to know:
- Equity markets are back at an all-time high as the business cycle continues its upward trend in an undulating pattern of ups and downs.
- The Federal Reserve (our central bank) has reduced interest rates by 0.25% to help offset the negative effects of trade negotiations, tariffs, and the slow economies outside of the US. This will likely be a positive for borrowers (e.g. people getting a mortgage or refinancing). It may also give an initial boost in the value of bond portfolios, but will ultimately reduce income from bonds as they mature and funds need to be re-invested at a lower interest rate.
- Unemployment is very low and workers are being paid more as businesses struggle to find skilled workers. The increasing earnings bode well for economic growth, but the scarcity of skilled workers may mean that actually realizing such growth will require businesses to invest in automation to enhance productivity.
- Inflation continues to be surprisingly low except for a small uptick due to the import tariffs. This could have an impact of consumer sentiment, but so far consumers have not reduced their level of spending. They will continue increasing their spending as they earn more.
City National Rochdale shares further insight about these changes and what’s next in its July Market Perspectives video: