author avatar
Mark Chandik

Jul 31, 2023

Defying Expectations

Weekly Market Commentary

Gross Domestic Product (GDP) is a very broad measure of the value of goods and services in the economy over a certain period.

Last week, the U.S. Bureau of Economic Analysis reported that GDP rose at an annual pace of 2.4% in Q2, accelerating from Q1’s 2.0% and topping the forecast of 2.0% (Wall Street Journal).

Sometimes, we analyze the quarterly change and find that one-off factors aided or detracted from the headline number. This time, however, that was not the case.

Although consumer spending slowed a bit, strong spending and investment by businesses more than made up for any slack. It’s also worth noting that the many recession predictions made since the start of the year continue to miss the mark.

Meanwhile, the Federal Reserve hiked its key rate by 0.25 percentage points to 5.25 – 5.50%, the highest in 22 years.

The fast pace of rate increases last year has been replaced by a much more subdued posture, which has helped fuel the recent stock market advance.

The Federal Reserve didn’t shut the door on another rate hike (or hikes) this year, but it didn’t provide much detail on the timing or certainty of an increase. Much will depend on the economy and inflation. And that’s a bit of an unknown, even for the best economic forecaster.

author avatar
Mark Chandik

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Adviser and Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc., Member FINRA/SIPC. 130 Springside Drive, Suite 300, Akron, OH 44333-2431 800.765.5201 Prosperity Partners and FDP Wealth Management, LLC are separate entities from ValMark Securities, Inc. and Valmark Advisers, Inc. Prosperity Partners, FDP Wealth Management, LLC, ValMark Securities, Inc., Valmark Advisers Inc., and their representatives do not offer tax advice. You should consult your tax professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

Indices are unmanaged and do not incur fees, one cannot directly invest in an index. You should consult your tax professional regarding your individual circumstances. This information is provided by Financial Jumble, LLC. Financial Jumble, LLC is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.

RELATED POSTS

It’s Not Just Oil – Key Commodities That May Soon Be in Short Supply

Oil has captured much of the attention amid the conflict in the Middle East. While a limited number of tankers are transiting the region, the Strait of Hormuz is largely blocked, disrupting nearly one-fifth of the world’s oil supply.

California’s Delicate Energy Situation

How long the war might last is not clear, but its effects are being felt in global energy markets. Oil moves easily across borders, which means supply disruptions quickly lead to higher gasoline prices.

Decoding the Fed: Impact on Investors

Against the backdrop of the war, the Federal Reserve met last week and decided to hold its key rate—the fed funds rate—unchanged at 3.50–3.75%. The decision was completely expected.

Looking Past the Pump: A Granular Look at Gasoline Prices

There are fears that higher prices will exacerbate inflation and hurt the economy, as cash that might have gone to other items will be diverted to the gas tank.

The War and Its Impact – So Far

What is the efficient market theory? Textbooks have been written to fully explain the theory. But if we can sum it up in one sentence: Assets, such as stocks, reflect all publicly available information. It is a foundational principle of finance.