Following a weak but positive first quarter, the US Economy grew at a more reasonable rate of 2.3% in the second quarter. It is the same sluggish growth we have seen before. General sentiment is pointing to a slow but steady growth rate of 3% in the second half.
One consistently positive piece of data has been the decline in the unemployment rate, which is sitting at 5.3%, slightly below the 5.5% trigger rate for the Fed to begin raising interest rates.
While we have reached that target, there are many factors, including wage growth that are influencing the Fed’s interest rate decision. One thing we know with certainty is the Fed will begin slowly raising interest rates. When and what the impact will be remains unclear.
Uncertainty regarding Fed timing, the impact of a stronger dollar on GDP and whether consumers will step up their spending have contributed to the US Stock Market taking a break from its steady rise during the past two years. For 2015, the market has been relatively flat and appears to be sitting and waiting for more clarity.
With the current lack of clarity, many people are asking which investment choices are best. We believe that uncertainty (and there is always some) is best addressed through diversification. Guessing what is going to be strong today leads to poor results. Diversification ultimately wins out over the long-term.
We hope that by our third quarter report some of the uncertainty will have lifted and we will have more clarity from the Fed about interest rates. Although we are not going to hold our breath on that one.