Over the past several days, a number of economic indicators have been released. Some of these figures suggested a weaker U.S. economy during the first quarter of 2014, while others provided a bit more optimistic view of the U.S. economy.
In its monthly survey of consumer confidence, the Conference Board indicated a moderate improvement in the results for May as compared to April. One of the contributing factors to the general improvement in consumer sentiment was an improved expectation for the U.S. labor market. According to the May survey, 18.3 percent of consumers expected their incomes to increase as compared to 16.8 percent with this expectation in the April survey.
First quarter 2014 reports on the U.S. gross domestic product, or GDP, revealed a contracting economy. This analysis, provided by the Bureau of Economic Analysis, reported the U.S. GDP decreased at a rate equivalent to an annualized negative growth rate of 1 percent. While this indicator of the health of the U.S. economy did not provide much positive news, it was not altogether unexpected. Severe winter weather conditions in much of the country during the first quarter of 2014 had been previously noted by many companies as a significant contributing factor to below-expectation financial results during that period.
As these and other economic indicators have been released in the recent past, the benchmark 10-year maturity U.S. Treasury note has traded at somewhat lower yields. With annual yield levels being pushed below 2.5 percent, participants in the U.S. bond market, which include the U.S. Federal Reserve and its monthly bond purchases, continue to allocate investable funds at these relatively low yield levels.
While the current health of the U.S. economy and the outlook for its future growth are important drivers of the domestic capital markets, economic influences from outside the U.S. borders cannot be ignored. An expanding global middle class, with its desire to acquire goods, continues to emerge in many developing countries. Additionally, central bank policies in foreign countries affect the business climates far beyond their sovereign borders.
Kirby Brown is the CEO of Beneficial Financial Group, which is based in Salt Lake City.