According to the Atlanta Fed GDP Now Forecast, economic growth in the fourth quarter is on pace to surpass 3% for the third consecutive quarter. As you can see in the chart below, the American economy hasn’t put together three consecutive quarters of 3% plus growth in over a decade. Burdensome regulation and anti-business sentiment apparently had a bigger impact on the economy than many assumed. The economy has grown at such a subdued rate for so long that economists started to assume the U.S. wasn’t capable of growing at 3% again. Three percent is above average growth with today’s demographics, but coming out of the deepest recession since the Great Depression, one would have expected a stronger rebound.
What is the takeaway for you? What is assumed to be true today about the economy or the financial markets, may change tomorrow. If you are on the lookout for risks along these lines, start thinking about inflation. A shift in the market’s outlook for inflation could have a profound impact on many investors’ portfolios in 2018.