Fourth Quarter GDP was released this morning and the first estimate came in short of 3%, but the details of the report were positive. Inventory drawdowns detracted three quarters of a point from GDP in the fourth quarter. Personal Spending rose at a 3.8 percent annual rate with durable goods soaring double digits. Look for upward revisions to fourth quarter GDP when new numbers are released next month and in March.
The durable goods orders numbers that came out today also showed strength. This is a separate series from GDP. Durable goods orders were up 2.9% in December vs expectations of a 0.8% rise. That comes after an upwardly revised 1.7% increase in November.
Consumers are confident and they are spending money, and over coming weeks they are going to get a pay bump from the Trump tax cuts if they haven’t already. Some are even getting bonuses and wage increases as a result of the tax cuts.
The only questions investors should be asking with an economy this hot are, how long can these historically low interest rates last, and what would a big jump do to my stock and bond portfolios? Those not positioned right could be in for a nasty surprise if the ongoing dynamism in the economy bleeds into the bond market.
Jeremy Jones, CFA
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