Quarterly Economic Review - First Quarter 2016Submitted by Rock House Financial on April 28th, 2016
The first quarter of 2016 was somewhat of a roller coaster. The first few weeks of the year started with a sharp downturn in equity markets which had many people worried about potential recessions and a repeat of 2008. Now, a few months later, those fears seem to have been somewhat unfounded as the stock market has completely rebounded and turned positive for the year. Volatility in markets can be unsettling for many investors, but as with everything, it is always important to understand the fundamentals and what is behind the movements.
In the United States, GDP growth continues to be positive but sluggish and grows as the consumer spending sector grows. The housing sector continues to be strong and the manufacturing sector also had a positive quarter to start 2016 after a few quarters of slowing growth. Employment continues to be steady and inflation which has long been stagnant, ticked up slightly and is closer to the Federal Reserve’s long term goal. Looking outside the US, we continue to see struggles for much of the international world. This quarter saw Japan make the plunge into the world of negative interest rates as both they and the European Union continue to try anything they can to spur growth. With continued divergence in monetary policy, we also saw the Federal Reserve take a more conservative approach with their rate hikes leading to a flatter yield curve and weaker dollar. While uncertainty will always be present, the overall economic picture is, by many measures, more positive than it is often made out to be.
|Indicator||Current Quarter Indication||Previous Quarter Indication|
|Gross Domestic Product||Positive||Positive|
|Housing / Construction||Neutral||Positive|
|Investment / Manufacturing||Neutral||Positive|
|Inflation / Deflation||Neutral||Positive|
|The Conference Board Leading Economic Index® (2010=100)||124.6 (November)||