Thought For The Week

This morning’s 4Q GDP print came in a touch lower than expected, at 0.70% versus the consensus estimate of 0.80%. Looking through the numbers, this appears to have largely been caused by businesses trying to tackle high inventory levels (reducing the amount of new goods they purchase for sale), weak exports (stronger dollar and weaker global demand), and softer business investment (mainly from energy related businesses).

This seems to paint a dim picture for future growth prospects; however there are also several reasons to be hopeful for a stronger 1H 2016 and beyond. There was a slowdown during the quarter in consumption growth, which is being somewhat attributed to record wet weather. Alongside this, real personal disposable income increased. When taken together with a still strong consumer confidence level and employment still expanding at a good pace, consumption growth is expected to pick up again this year.

Despite this release of data, driving the markets higher this morning was the Bank of Japan’s decision to inject further stimulus through the use of negative interest rates. This has bolstered several currencies versus the JPY, and in theory should lead to improved exports and cheaper money fo businesses in Japan.

Data Source: Bloomberg as of 01/29/2016

Data Source: Bloomberg as of 01/29/2016

This commentary is not intended as investment advice or an investment recommendation. It is solely the opinion of our investment managers at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Past performance is no indication of future performance. Liquid securities, such as those held within DIAS portfolios, can fall in value.
Global Financial Private Capital is an SEC Registered Investment Adviser. S&P 500 Index Total Return: The Standard and Poor’s 500 index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Total return includes interest, capital gains, dividends and distributions realized over a given period of time.

Russell 1000 Value Index Total Return: The Russell 1000 Value index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Total return includes interest, capital gains, dividends and distributions realized over a given period of time.

U.S. 10 Year Treasury Yield: The on-the-run aggregate yield of 10 year U.S. Treasury bonds.
Crude Oil WTI: Crude Oil WTI refers to the front month futures for West Texas Intermediate crude oil. WTI crude oil is the underlying commodity of the New York Mercantile Exchange’s oil futures contracts.

Gold XAU: Gold XAU is the spot price of 1 troy ounce of gold used for international trade and is denominated in USD. You cannot invest directly in an index. Consult your financial professional before making any investment decision.