Tom Dorsey Enterprises
Tom Dorsey Enterprises
Overview of the U.S. Economy:
The economy of the U.S. is in good condition, unemployment is down, inflation is low (estimated at 1.2%) and most businesses are making profits and returning a respectable amount to stockholders through dividends and appreciating book value in their company.
In August and September 2015, the market dropped, mostly due to the rest of the world's economies are struggling.
The forecast looks good with a healthy dose of skepticism. I say that because we will see one day, or a week at a time where the world markets drop and drag the rest of the world down, but each time the U.S. markets recover due to the strength of the U.S. companies. Expect the continuation of ups and downs in the near future.
The latest statement from the Federal Reserve Board on the economy include:
The Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.
My assessment of their statement is simple and straight forward.
1. World economies and markets are creating a drag on the U.S. economy.
2. The unemployment numbers are down, but workers are underpaid due to the under-utilization of the workforce.
3. Inflation is below the 2% stated target, but I see 3% as the point of action for the Fed.
4. The Feds want to raise the interest rate and be seen as proactive, but no increase in September, which stays on track with the numbers and not jumping ahead of the current market conditions.
Economy of the World:
The rest of the world's economies are struggling. Europe has been dealing with the Greek debt over the last year and has not focused on the issues toward their recovery. In August 2015, all sides found an agreeable solution, however not perfect for any.
Europe is not in bad condition, but most focus on getting better. Most of the northern countries are in better condition than the southern countries.
The refugees flowing into Europe from Syria and Africa are causing strains on the countries' budget and some crime has been reported internationally.
China has a major problem the government is covering with all the cash they are pouring into the markets. Although this looks like it is stabilizing the issue, the truth is, it is not. The problem will run its course, which will continue to cause ripples across the global economy.
China will have to let the markets find the true bottom, and fix the cause, not mask the problem. The bottom is more than 1 year away.
Japan's economy is not as bad as China's but has little to no growth, and the government is attempting to stimulate it with some QE methods. Not quite sure how bad the problem is, but when China rights its ship, then Japan's economy will improve also.