Lower GDP Growth No Reason to Panic
Underneath all the changes in the fourth-quarter GDP data, the U.S. economy is still the same slow-moving ocean liner.
Developed-country equity markets rebounded this week, showing some reasonable improvement. The S&P 500 Index was up over 1% for the week, with other developed markets tracking just slightly behind. Emerging markets didn't fare as well, showing little change with ongoing concerns from China related to their lending policies and currency management. Not surprisingly, commodities were slightly down for the week, and interest rates ticked downward slightly with the U.S. 10-year Treasury bond now yielding 2.68%.
This week's data seemed to indicate that the economy wasn't making much progress in either direction, and the fourth-quarter GDP growth rate was downgraded to 2.4% from the previous reading of 3.2%. The bond market and commodity markets both seem to doubt the probability of any rapid improvement in the economy. Equity markets seem to be benefiting from the lack of many alternatives and declining interest rates since the beginning of the year, which came as a complete surprise to most investors.
Robert Johnson, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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