Expect slower U.S. economic growth but not an equity bear market
NewsletterHow to survive a bear attack
The best way of being kind to bears is not to be very close to them.– Margaret Atwood
The U.S. economy surprisingly contracted by 1.4%, on a seasonally adjusted and annualized basis, for the first quarter of 2022. The consensus expectation for Q1 GDP, according to Bloomberg, was for a 1% gain, much slower than Q4 2021 GDP of 6.9%.While the number was negative, there were some positive components to the final number—such as strong imports, services, and purchases of durable goods (goods that are able to be kept for a period of time), which indicate a healthy consumer. A slowdown in U.S. economic growth has been long expected but the surprising negative period has led to increased chatter of a recession, broadly defined as two consecutive quarters of negative GDP growth and the potential of an equity bear market along with it.
A rise in interest rates typically causes bond prices to fall. The longer the average maturity of the bonds held by a fund, the more sensitive a fund is likely to be to interest-rate changes. The yield earned by a fund will vary with changes in interest rates.
Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a fund’s investments.
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