Nothing New to See From Here

Economic output ebbs and flows.  During the good times, the business cycle is expanding, and it tends to spend most of its time in this phase.  However, from time to time, the expansion reaches near-term peaks and begins descending.  Generally speaking, if this downturn lasts long enough, our economy enters into a recession.  Colloquially, recessions are defined as a period of at least two quarters of contracting economic output.  Atlas follows various economic indicators in an attempt to monitor the health of the economy.  From where we sit, we do not see a contraction on the horizon. But don’t take our word for it.

Yesterday the Federal Open Market Committee wrapped up the sixth of this year’s eight calendared meetings to determine interest rate policies.  At its conclusion, the group raised the overnight interest rate target range by one-quarter of one percent to 2.00 – 2.25 percent.   This was a foregone conclusion according to futures markets, so there was no surprise at the announcement.  However, there was an encouraging proclamation during the Federal Reserve Chairman Jerome Powell’s post-meeting press conference.

The Fed Chair and his team of economists and bankers believe there is very little chance of a recession during the next year or two.  This outlook is helpful to a central banker trying to justify raising interest rates which reduces monetary support of the economy.  As long as this current outlook remains intact, Atlas expects the next interest rate hike will come in December.  Early looks into next year’s market expectation for overnight interest rates suggest at least another uptick in the overnight lending rate early in 2019.

Atlas will not rest on the laurels of well-equipped economists.  Instead, we will continue monitoring market responses to news and economics, making adjustments to our managed portfolios according to the fundamental forces of supply and demand.