The Federal Reserve’s (Fed) next Federal Open Market Committee (FOMC) meeting will take place on Tuesday and Wednesday (September 19 – 20) and will be followed by the release of the FOMC policy statement on Wednesday at 2:00 p.m. ET. Along with the statement, the FOMC will release a new set of economic forecasts (gross domestic product [GDP], the unemployment rate, inflation, and fed funds projections, also known as the “dot plots”). Fed Chair Janet Yellen will also hold a press conference — the third of four in 2017 — at 2:30 p.m. ET.
Growth has been on a roll. Based on the Russell 3000 style indexes, growth’s 18% year-to-date gain is 14% ahead of value’s 4% advance. Looking further back, this growth outperformance is nothing new. Over the past 10 years, including the entire financial crisis period of 2008 and 2009, growth has outpaced value by about 50% [Figure 1], representing the longest period of growth outperformance since style indexes began to gain a following about 40 years ago.
The Federal Reserve (Fed) is widely expected to announce more details about the timing of its balance sheet reduction during the Federal Reserve Open Market Committee (FOMC) meeting this week, and markets are buzzing with anticipation. The Fed has purchased more than $4.2 trillion of bonds since 2008 through multiple quantitative easing (QE) programs in order to decrease supply in the market and push interest rates lower to catalyze borrowing and economic growth.
Economic reports released in August 2017, which mostly reflect economic activity in July, confirmed that the U.S. economy continued to exhibit steady growth at the start of the third quarter after a solid rebound in the second quarter. The primary driver of the expansion was support for business spending which has continued to round out the solid picture of consumer spending. According to Bloomberg-surveyed economists, consensus expectations for real (inflation-adjusted) economic growth in the third and fourth quarter are for 2.5% and 2.4%, respectively.
The Portfolio Compass provides a snapshot of LPL Financial Research’s views on equity, equity sectors, fixed income, and alternative asset classes. This monthly publication illustrates our current views and will change as needed over a 3- to 12-month time horizon. Read recent issue...
Stock markets, bond markets, the economy, policy — some years they push and pull on each other lightly as markets follow their own path; in others, one influence, such as monetary policy, dominates. But sometimes, often following a period of change, understanding the pushes and pulls and how they interact becomes a key to reassessing market dynamics for the next year and beyond.
An important shift has taken place in this economic cycle. The Federal Reserve (Fed) was finally able to start following through on its projected rate hike path, raising rates twice in just over a three-month period. By doing so, the Fed showed increasing trust that the economy has largely met its dual mandate of 2% inflation and full employment, that the economy is progressively able to stand on its own two feet, and that fiscal policy may now provide the backstop to the economy that monetary policy has provided throughout the expansion.
During any presidential election, you can expect a barrage of promises from the yard sign endorsements, bumper stickers, stump speeches, and media headlines. All pledge to improve the economy, provide better education for all, and preserve the environment.
The Economic Cycle - We believe we are in the mid-to-late stage of the current expansion, but we are still seeing some early cycle and late cycle behavior. Extended loose monetary policy, inflation, and employment growth are still exhibiting early cycle behavior, while some items relating to corporate profits are showing late cycle behavior, although they may be reset if profits improve.