Economic Overview: Fourth Quarter 2015

Economic Overview: Fourth Quarter 2015

We estimate fourth quarter GDP growth in the U.S. will be 2%, once all numbers are in. That would put full year GDP growth at about 2.2%, which is below the level for 2014 (2.4%) and for 2013 (2.6%). Some of the reasons growth has been challenged include lower capital spending in the energy and mining sectors, slowing economic activity in China and other emerging economies, and headwinds from the strong dollar.

While the U.S. economic growth is nothing to shout from the rooftops about, it is still better than most the other leading economies of the world. Other major economies continue to struggle to recover from the financial crises and are taking stimulus measures. Japan, for example, grew less than 2% as did the Eurozone. Growth in the emerging markets was only about 4%, significantly down versus close to 8% before the financial crisis hit. It is interesting that these overseas governments are taking steps to reduce rates now. With the Fed having raised rates recently, we are now doing the opposite. A few of the positive factors helping U.S. economic growth include a falling unemployment rate and rising earnings. The unemployment rate fell from 5.8% to 5.0% during 2015 and new job growth (nonfarm payrolls) averaged a healthy 210,000 jobs per month. What’s more, average hourly earnings ticked up 2.3%, noticeably better than the core rate of inflation which rose about 1.3% during the year. Thus, the powerful American consumer will have more money in their pocket to fuel growth.

All references in this publication referring to our average allocation or “typical portfolios” reflect those of the fully discretionary accounts of clients with moderate risk profiles. Actual client portfolios are tailored to individual client circumstances and asset allocations may vary.  Any reference to returns reflect the performance of asset classes, are for illustration purposes only, and do not reflect the returns of any specific investment of Smith & Howard Wealth Management. No representation is made that any investment decisions discussed herein have been profitable in the past or will be in the future. Past performance is no guarantee of future results. A list of all recommended investments is available upon request.

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