As they do each month, the Federal Reserve Bank of Chicago published its latest findings on the state of the U.S. economy earlier this week. Here is an excerpt from their press release:
“Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) edged up to +0.13 in January from –0.07 in December. Three of the four broad categories of indicators that make up the index increased from December, and only one of the four categories made a negative contribution to the index in January.
The index’s three-month moving average ticked down to +0.33 in January from +0.34 in December. January’s three-month moving average number suggests that growth in national economic activity was above its historical trend. The economic growth reflected in this indicator suggests modest inflationary pressure from economic activity over the coming year.”
It looks like the good news continues for the U.S. economy — growth above the historical trend line and modest inflation expectations. You can read the full press release and more about this important economic report at the Chicago Fed website.
I’ve taken a break from writing blog posts for a few months because I was burned out. That’s right. Even I get tired of writing about personal financial matters. The press of client work, a State of Washington audit of our business (which occurs every few years), year-end tax planning with clients and a rush of client work at the start of the New Year overwhelmed me. That and the desire to have a balanced life too. A colleague of mine, Todd Tressider (www.financialmentor.com), turns down his activity during the summer on purpose. I may do the same.
However, those are excuses. The truth is that I don’t know what to think about personal financial matters right now. Consider this:
- The price of oil has dropped by almost half since August 2014.
- U.S. stocks, particularly large U.S. stocks, continue to grind higher in price (the S&P 500 index is up 12.85% in the last year).
- The U.S. un-employment rate is 5.7%, which is down from 6.6% a year ago.
- Compare that to un-employment rates of 9.8% in Germany, 8.8% in France and 8.4% in Spain.
- Most world currencies have dropped in value compared to the U.S. dollar; for example, the Euro has dropped almost 20% in value against the U.S. dollar, which means you can buy 20% more in Europe today then you could a year ago.
- The benchmark for bond yields is the 10-Year U.S. Treasury note. The current yield is 1.68%; a year-ago it was 2.76%, which is almost a 40% drop. What this is saying is that if you loan the U.S. government money by buying one of its notes, you’ll earn 1.68% per year for your money!
- The latest U.S. inflation rate is .8%; that’s down from 1.5% in 2013, about half as much.
Therefore, the question on my mind, and probably yours too, is this: how long can the good, no make that great, news last in the U.S.? Is this the top of the economic and investment cycle or is there more ahead? I don’t know and I’ll share my thoughts in the next post, which won’t take three months to write this time, I promise.