The once dreaded and feared interest rate raise seems to have run its course from a fear standpoint. Just a few quarters ago when Ben Bernanke was the Federal Open Market Committee (FOMC) chairperson, the whisper of a long-awaited rate hike lead to market calamity and many to believe rates would be permanently artificially low.
Near the end of this most recent quarter, current FOMC chair Janet Yellen raised rates to the 1% level, a level not seen in almost a decade and without much capital market trepidation. Longer term the short-term interest rate controlled by the FOMC may not go all the way back to the higher levels once seen historically, however a 2-3% rate would still be stimulating from our perch. It is possible the gradual move higher will extend this current economic expansion.
Speaking of rates, in our Q3 2017 Quarterly Newsletter we do a complete deep dive on interest rates, among many other items, that may have changed Residential Housing Prices movement for the foreseeable future. While so many argue of reasons for Housing volatility, the answers are less vivid than many may think.
Continued optimism from company executives seems to have given them confidence to expand their businesses dropping the unemployment rate to levels many thought not possible via hiring’s of workers. It is possible an employed consumer is a happy consumer who is also a consumer who spends more. With consumer spending making up over two thirds of Gross Domestic Production (GDP) this bodes well for domestic and world growth, as long as it continues.
Given low but rising interest rates (finally) a happy higher price valued Home Owner (again full details in the Newsletter), a happily employed consumer, it is no wonder many assets and most capital assets, especially the US markets are priced to perfection (high compared to historical values). The fantastic news is that our overseas counterpart capital markets are not priced as high and it looks like investors are finally beginning to warm to their markets. Our good friend diversification keeps us exposed to these markets as the possibly reawakening occurs. Look for more on this on our street-cents.com blog.
Summer doldrums?
Maybe, but we always keep our guards up as risk can happen fast, even if the less tenured folks are at the wheel of the capital markets.
Have a Great Summer!
John A. Kvale CFA, CFP
Q 2 2017 Cover Letter
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
IMF Global GDP Estimates 2020-2022 From Visual Capitalist – Cool Three Year Global Estimate
We have noted multiple times to expect some roaring Economic Numbers, which is not a super prescient call due to easy year over year comparisons and the world actually reopening…. (Our curiosity is how this data is digested by Governments, Forecasters and Market Participants)
We ran across a neat Goldman micro time GDP chart recently, that has left our sight grrrrr, but is a quarter by quarter estimate that is fascinating…. we will likely find it eventually and present it here…
For now, we wanted to show this three year global GDP (Gross Domestic Production-Blunt Economic Growth Measurement) from the IMF (International Monetary Fund) –
The IMF, just like any organization misses in Forecasts …. it is not in stone, but this is a very interesting three year, more high level look at the globe as it reopens….
IMF – Visual Capitalist Global Three Year GDP Comparison
This chart was a slider and can be found directly at our friends from Visual Capitalist Here–
Year 2020 Findings we find most interesting:
USA GDP Contracts only 3.3% Wow
Global Average the same 3.3% Contraction – Wow Wow
Year 2021 ESTIMATES
Note USA estimated Growth of 6.4% – surprising low
IMF World rebound Estimate of 6% – again, surprisingly low
Year 2022 ESTIMATES – The farther you go the harder they are!
IMF US Estimate at 3.5%
Global Estimate 4.4% –
Not really what to think of this…. both seem off to us ! Clearly a USA Laggard Estimate!
This will be marked as forecast and we can look back and see how good or bad the estimates were!
Have a Great “Multi Year Global GDP Estimate” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Economy, Forecast, Investing/Financial Planning, Market Comments, World Political
Tagged GDP, Global GDP, IMF, International Monetary Fund, Visual Capitalist