Markets “In a Nutshell” for August 2, 2021
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.40%, the S&P 500 was down 0.40%, and the NASDAQ fell 1.10%. Foreign stocks (MSCI EAFE) were up, increasing 0.20%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 1.23%. (Data source: Wall Street Journal)
Economy Continues to Grow
Last week was a busy week for the market as a lot of new economic data was released as well as a busy week for quarterly earnings reports. From looking at all of this the data would show that the economy is still growing at a fast rate. Corporate earnings continue to rise as we move further from the Pandemic. Shortages in certain sectors are not allowing the economy to grow as quickly as it could but once the shortages are fixed we will see the economy continue to grow. The Fed also showed that they are in no hurry to tighten their accommodative approach to the economy but they are however getting closer to tapering asset purchases. Currently the Fed is purchasing $80 billion of Treasury securities and $40 billion of agency mortgage-backed securities (MBS).
Second Quarter GDP
Real GDP for the second quarter grew at a 6.5% annualized rate which fell short of the 8.4% forecast. The miss on GDP growth came from a decline on inventories, housing, government spending and the trade deficit increasing. Consumer spending however beat expectations as it rose 11.8%. This is due to vaccines being rolled out and people have saved up money and are ready to get out of the house and spend it. If the supply chain struggles did not exist, consumer spending would have likely even increased more. The economy is expected to slow down its growth over the next few quarters but is expected to outpace the 2.3% average GDP growth we saw from 2010-2019. We are now above the economic activity we saw prior to the Pandemic after just 6 quarters making this one of the shortest recession ever in history.
When was the highest recorded GDP annual growth rate in the United States? (Scroll Down for Answer)
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2. 1950. In the 4th quarter of 1950, the GDP annual growth rate was 13.40%.