Third Quarter 2017: Improving Economy Eclipses Natural and Political Storms
A series of devastating storms and rising North Korean tensions did little to slow global markets during the third quarter of 2017. World equity markets posted uniformly positive growth during the quarter, with developed international and emerging markets the best performers in the year to date. In the United states, investors continue to express a preference for companies that are growing quickly rather than trading cheaply.
US second-quarter GDP was revised upwards to 3.1%, marking the highest annual rate in two years. Steady job growth and the booming stock market have encouraged US consumers to increase their spending. Business spending also increased, for the second consecutive quarter.
The Federal Reserve announced plans to unwind some of its $4.5 trillion balance sheet, signaling the end of its experimental and controversial policy enacted first during the depths of the 2008-09 financial crisis. The announcement, communicated by Federal Reserve Chair Janet Yellen in an effort to avoid a repeat of the 2013 Taper Tantrum that spooked world markets into a selloff, was anticipated. Whether this is Janet Yellen’s last major act remains to be seen, as Yellen’s term ends in February. The next few months could bring wide-ranging changes at the Fed. Stanley Fischer, the Federal Reserve’s Vice Chairman, is stepping down in October, leaving four of seven board seats open.
Bonds in all major categories delivered positive returns in the quarter, as US Treasury rates remained relatively unchanged relative to a quarter ago.