The Government shutdown has come to an end, but it didn’t come without a cost. Standard & Poor’s estimates the impact to be roughly $24 Billion or .6% reduction in 4th qtr GDP. Original projections for 4th quarter GDP were fairly high, so hopefully this won’t cause too large of a dip in GDP.
The government is now funded through January 15th and the debt ceiling has been lifted until February 7th. The major difference is a bi-partisan committee to evaluate and re-hash spending by the January 15th deadline, which should bring a much quieter February 7th deadline. Also, the post holiday deadlines should at a minimum allow retailers to see a more normal holiday season.
Taper talk has temporarily subsided; due in large part, to the economic drag suffered by the government shutdown. Tapering was to begin when the Federal Reserve believed there was enough momentum in the economy to withstand the reduction in its bond purchase program. With what I referenced earlier ($24,000,000,000.00 in case you forgot) most feel the Federal Reserve will not be prepared to begin Tapering as of yet.
The good news to come from all of this is:
- Equities have done well since the news; S&P 500 has recorded a new all time high.
- Bond interest rates have retreated on hopes of delayed tapering.
- Gold prices have increased on a weakening dollar.
- International markets have done well due to strong global PMI data.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.
If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.
Sources: mfs.com, oppenheimerfunds.com, and morningstar.com
* Financial Action, Inc. is a Registered Investment Advisor.