U.S. economy returns to growth after winter downturn. The U.S. economy grew at a seasonally adjusted 4% in the second quarter, according to numbers released last week from the Commerce Department, topping most economists’ forecasts. This was a nice rebound from the first quarter’s steep contraction of 2.1%–the worst single quarter downturn in five years. The numbers tend to confirm that the economy is improving steadily, and that the first quarter’s contraction was a weather-related aberration.
Fed sees labor-market slack even after unemployment rate dropped. The Federal Reserve said the labor market “still has plenty of room for improvement,” even after a surprising drop in unemployment, bolstering the case for keeping interest rates low. The Fed repeated it is likely to keep interest rates low for a “considerable period.” Concerns about persistently low inflation also have “diminished somewhat.”
Bubbles Again: Setting Up For A Deal Frenzy. Jeremy Grantham, founder of the investment firm GMO, cautions about a bubble if the S&P 500 gets to around 2250. It’s now at 1920 (as of market close Tuesday, August 5th) and would have to increase 17% to get to 2250. He also says, “perhaps the single best reason to suspect that a severe market decline is not imminent is the early-cycle look that the economy has.” So although he cautions about potential bubbles he is not saying one is imminent. You’ll find his thoughts beginning on page six of the linked article.
And in case you missed it, click here to read last week’s blog post which discusses lessons learned while dealing with serious illnesses in your family.
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