Economic Overview: 3rd Quarter 2014

After contracting in the first quarter of 2014, GDP rebounded a strong 4.6% in the second quarter, and recent data points to continued, if lesser, growth in the quarter just ended.  This confirms our belief that the slowdown in the first quarter was likely weather related.

Many factors contributed to the improvement in economic activity.  First, unemployment is now down to 5.9%. Many investors may be surprised to learn this is actually slightly below the long-term (50 years+) average of 6.1%.  Almost nine million jobs were lost in the Great Recession, but over 10 million have been gained since. Total household net worth hit a new all-time high during the quarter, and now stands over 20% higher than the previous peak in 2007. Household debt service ratios remain low (this measures the percent of income required to service one’s debt), and this is pushing auto sales (see chart) and housing starts back closer to historical levels. Businesses are again investing as well, and returning billions of dollars to shareholders in the form of dividends and share buybacks.

Economic growth globally is more sanguine, and is hovering around 2% for the developed markets and double that rate in the emerging markets.

These divergent paths of growth between the U.S. and the rest of the world have led to a surge in the U.S. dollar, relative to global currencies. Most of the world’s central bankers are keeping their interest rates low, while the Fed is widely expected to begin pushing U.S. rates higher next year.  Most economists expect more of the same, with the U.S. growing faster than Europe for some time.

Economic Overview Q3 2014 chart

Other articles that appeared in the 3rd Quarter issue of Your Family CFO Report include Investment Management and Asset Class Summary. Please call us anytime with questions at 404-874-6244 and feel free to pass our message along to friends.

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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