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<blockquote data-quote="Jaysen" data-source="post: 3593" data-attributes="member: 1"><p>Friday 26 October 2018</p><p></p><p><strong>The good and bad side of the US economy </strong></p><p><strong></strong></p><p><strong>How is the US economy doing well?</strong></p><p></p><p>Today the Commerce department revealed that the US economy has grown at a 3.5 percent annual rate. Consumer spending was strong -- increasing by 4% -- and made up about 70% of economic output. This means the US economy is on track for the fastest annual growth in 13 years.</p><p></p><p>This month companies have also been reporting their earnings for their third quarter. So far, the results have been good and third quarter profits from the S&P 500 - the large publicly listed US companies - are on track to increase by 22%. International Paper announced profits rose by 10.3%. Intel's profits rose by 4.5%. Twitter stock increased by 15.5%. Microsoft's jumped up 5.8%.</p><p></p><p>The overall picture seems good: unemployment is almost at 50-year lows while stocks have risen almost 300% since 2009.</p><p></p><p><strong>Why is the US economy doing well?</strong></p><p></p><p>As mentioned, the strongest sector was consumer spending. Many people are in employment and they're confident enough to spend.</p><p></p><p>Donald Trump's tax cuts have also contributed to the growth in stocks. As businesses and consumers have more disposable income, they are encouraged to spend, especially at a time of low interest rates.</p><p></p><p><strong>How is the US economy not doing well?</strong></p><p></p><p>All of the gains made by the S&P 500 (the index which tracks the largest listed US stocks) this year have now been wiped out. Disappointing earnings from big tech stocks such as Amazon and Alphabet today triggered a further stock market sell of.</p><p></p><p>The US will be increasing tariffs on $250bn of Chinese imports. US tariffs hurt US companies that import Chinese goods while China's retaliatory tariffs hurt US companies trying to sell to Chinese consumers.</p><p></p><p>While corporate earnings this quarter are good, it's lower than second-quarter earnings (4.2%).</p><p></p><p><strong>Why is the US economy not doing well?</strong></p><p></p><p>For investors, there's a lot to be worried about:</p><ul> <li data-xf-list-type="ul">The Federal Reserve will be meeting in December for the next interest rate hike. A rise in interest rates may impact corporate earnings and dampen spending.</li> </ul> <ul> <li data-xf-list-type="ul">China growth is slowing down meaning US companies may see a fall in sales to Chinese consumers. To top this off, the US is engaged in a trade war with China and there seems to be little evidence this is benefiting the US economy.</li> </ul> <ul> <li data-xf-list-type="ul">Trump's tax cuts are a one-off. Investors are looking to the future when the stimulus wears off. So the US stock market may be as good as it gets right now.</li> </ul> <ul> <li data-xf-list-type="ul">While Donald Trump has taken credit for the growth -- and criticised the US central bank, the Federal Reserve, for raising interest rates -- some of the trends were already present in the economy. For example, unemployment had been falling since 2010. Many investors are also pulling out now as there's a midterm election coming up.</li> </ul></blockquote><p></p>
[QUOTE="Jaysen, post: 3593, member: 1"] Friday 26 October 2018 [B]The good and bad side of the US economy How is the US economy doing well?[/B] Today the Commerce department revealed that the US economy has grown at a 3.5 percent annual rate. Consumer spending was strong -- increasing by 4% -- and made up about 70% of economic output. This means the US economy is on track for the fastest annual growth in 13 years. This month companies have also been reporting their earnings for their third quarter. So far, the results have been good and third quarter profits from the S&P 500 - the large publicly listed US companies - are on track to increase by 22%. International Paper announced profits rose by 10.3%. Intel's profits rose by 4.5%. Twitter stock increased by 15.5%. Microsoft's jumped up 5.8%. The overall picture seems good: unemployment is almost at 50-year lows while stocks have risen almost 300% since 2009. [B]Why is the US economy doing well?[/B] As mentioned, the strongest sector was consumer spending. Many people are in employment and they're confident enough to spend. Donald Trump's tax cuts have also contributed to the growth in stocks. As businesses and consumers have more disposable income, they are encouraged to spend, especially at a time of low interest rates. [B]How is the US economy not doing well?[/B] All of the gains made by the S&P 500 (the index which tracks the largest listed US stocks) this year have now been wiped out. Disappointing earnings from big tech stocks such as Amazon and Alphabet today triggered a further stock market sell of. The US will be increasing tariffs on $250bn of Chinese imports. US tariffs hurt US companies that import Chinese goods while China's retaliatory tariffs hurt US companies trying to sell to Chinese consumers. While corporate earnings this quarter are good, it's lower than second-quarter earnings (4.2%). [B]Why is the US economy not doing well?[/B] For investors, there's a lot to be worried about: [LIST] [*]The Federal Reserve will be meeting in December for the next interest rate hike. A rise in interest rates may impact corporate earnings and dampen spending. [/LIST] [LIST] [*]China growth is slowing down meaning US companies may see a fall in sales to Chinese consumers. To top this off, the US is engaged in a trade war with China and there seems to be little evidence this is benefiting the US economy. [/LIST] [LIST] [*]Trump's tax cuts are a one-off. Investors are looking to the future when the stimulus wears off. So the US stock market may be as good as it gets right now. [/LIST] [LIST] [*]While Donald Trump has taken credit for the growth -- and criticised the US central bank, the Federal Reserve, for raising interest rates -- some of the trends were already present in the economy. For example, unemployment had been falling since 2010. Many investors are also pulling out now as there's a midterm election coming up. [/LIST] [/QUOTE]
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