Equity markets have continued to be choppy in the first two months of 2014 because of lackluster economic data. The U.S. economy added 113,000 jobs in January, which was lower than the consensus expectation of 178,000. The unemployment rate is now 6.6 percent, which is just above the U.S. Federal Reserve’s goal of 6.5 percent. The Fed has stated that it would consider raising rates once this goal is reached. Without strong economic growth, rising interest rates could cause deterioration in bonds and real estate, as well as the stock market.
Although the Fed is close to its previously stated goal, the new chairman, Janet Yellen, will likely examine other indicators such as labor force participation and the inflation rate before allowing interest rates to spike significantly. With the U.S. debt hovering around 100 percent of GDP, interest rates any higher than current levels would put a strain on our country’s budget, and therefore could damper economic growth.
clearTREND offers monthly market analysis and research on individual stocks, mutual funds, or economic sectors, including markets in Northeast Wisconsin. For March, we highlight the technology innovations and continuing education sectors of the economy. We also feature the largest employment sectors for Green Lake, Waushara and Marquette counties, current trend analysis on select companies headquartered in Wisconsin, as well as featured international economies.
This month’s clearTREND U.S. Economic Health IndexTM shows that 65 percent of U.S. sectors are expanding, which is a favorable read on the overall U.S. economy. However, this number is significantly lower than last month’s reading, which showed 89 percent of sectors were expanding. In addition, the sectors that are contracting has increased substantially, up to 24 percent from 8 percent last month.
“The markets could be coming to an inflection point,” says Mark Scheffler of The Appleton Group. “With important decisions to be made regarding U.S. monetary policy in the coming months, investors should be prepared to react.”
Click here to view this month’s economic data in our digital issue.