Despite the final revision of Q1 GDP numbers, this month has been marked by record market highs along with low levels of investor fear. The Bureau of Economic Analysis put out its third and final GDP estimate, decreasing Q1 economic growth from -1.0% to a whopping -2.9%. Other reports provided more insight into the economy, including measurements of weak wages relative to inflation. Private sector wages have grown only 1.7% against an inflation rate of 2.1% in the last 12 months. In defiance of these metrics, markets sped ahead with the Dow reaching a record high of 17,000.
Indicators have shown that the economy is not meeting growth expectations, which should ultimately have a drag on U.S. markets. Yet, markets are shown to be firmly in “bull” territory, especially since Fed Chairwoman Janet Yellen promised to increase stimulus spending if the economy weakens. As a result, investor fear continues its downward trend to reach lows not seen since before the Great Recession.
The clearTREND® Economic Health IndexTM is now showing its most favorable reading of the year, with 80% of U.S. sectors expanding. “With news headlines noting all-time market highs, investor optimism has been as strong as it has been for several years,” says Alex Haas, advisor to private clients and retirement plans. “However, attention being given to the stock market rally has taken focus away from global economic risks, such as rising debt levels and the potential side effects of monetary stimulus.”
Click here to view this month’s economic data in our digital issue.