Some readers have shown interest in reading additional information in regards to the overall economy and investing in particular so I want to give a breakdown on the big picture on a quarterly basis. We will start with the first quarter of 2007. Today I want talk about some of the key market indicators and tomorrow I will expand on these with a more detailed analysis of the markets.
Key Market Indicators
Economic Growth: U.S. economic growth appeared to be in a healthy range based on the latest report on growth in the country’s gross domestic product (GDP). In the 4th quarter of 2006, real GDP grew at an annual rate of 2.5% up from 2.0% in the 3rd quarter.
Interest Rates: Fed held the federal funds rate steady at 5.25%. For now, hopes for an interest rate cut in the first half of 2007 seem to have diminished.
Inflation: The core Consumer Price Index (CPI), excluding food and energy costs, was 2.7% in February 2007. This is slightly above the 2.0% target, but still in a reasonable range.
Corporate Earnings: 4th quarter results continued its string of double-digit earnings. The outlook for 1st quarter corporate profits are in the high single digits around 7-9%.
Employment: Strong job figures continued for the quarter.
Consumer Confidence: A big worry for U.S. investors was the potential impact that growing mortgage defaults could have on the country’s broader economy as activity in the residential housing sector continues to lag. Also, with rising gas prices, consumers have less money to spend on other items.
Currency: The U.S. dollar continued to decline during the quarter. The weaker U.S. dollar in part contributed to strong international returns.
Geopolitical: Oil prices were a growing concern as tensions rose between Iran and the U.K. towards the quarter-end over the fate of 15 sailors and marines from the U.K. who had been seized by Iran.
Don’t forget to check back tomorrow for more detailed analysis of oil prices and the capital markets.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.