The U.S. economy surged during the second quarter with GDP growing at a 4.1% rate which is the highest quarter in four years and the fourth-best quarter since the expansion began in 2009. This is a significant increase compared to the moderate 2.2% rate for the first quarter. Consumer spending, which represents about 70% of GDP, was particularly strong. Increased business investment, along with government spending, helped propel growth as well. While 4.1% growth is an impressive quarterly number, economists expect growth to moderate in the second half of the year with the final 2018 GDP growth to be around 3.0%.
We’re well underway into earnings season as now more than half of the S&P 500 companies have reported second-quarter results. So far, earnings are up 22.6% over the second quarter of 2017 putting us on pace for the second quarter in a row of 20%+ earnings growth. The Energy sector is the largest contributor with 123.0% growth. This is mainly due to corporate tax cuts and the fact that a barrel of oil was trading around $50 in the second quarter of 2017 compared to about $70 in the second quarter of 2018. The other strong sector results are coming from Materials, Financials, and Technology with 36.4%, 24.9%, and 23.9% respectively.
We experienced some relief in the trade-war rhetoric last week with President Trump and the EU President, Jean-Claude Juncker meeting on Wednesday at the White House with an unexpected positive outcome. They’ve agreed to a framework to continue negotiating the elimination of tariffs and subsidies surrounding non-auto industrial goods without imposing new tariffs while talks are ongoing. This ease can, of course, and disappear in the blink of an eye (or a 280-character tweet). However, at least for now, the mood is cautiously optimistic.
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Author: Jim Rambo | Research Team | Allegheny Financial Group | July 2018
The information included herein was obtained from sources which we believe reliable. This report is being provided for informational purposes only. It does not represent any specific investment and is not intended to be an offer of sale of any kind. Past performance is not a guarantee of future results.
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