• Federal Reserve Chair Jerome Powell delivered an upbeat assessment of the U.S. economy in two presentations to Congress this week as newly released data supported his outlook.1 Retail sales in June, for example, reached its highest annual growth rate since early 2012 while initial jobless claims last week fell to a near 50-year low.2,3
  • The Federal Reserve Bank of St. Louis’s GDPNow tracker estimates that Q2 economic growth, to be released next week, will be 4.5%, which marks the model’s highest forecast since Q4 2011.4
  • U.S. GDP has spiked several times since 2010. As the chart shows for this time frame, there have been five quarters before Q2 2018 where GDP growth either approached or exceeded 4%.5 In each case, growth slowed significantly the following quarter. Over the entire period, GDP growth has averaged a meager 2.2%.5
  • The Fed continues to project a gradual slowdown in the coming years, with a projected longer-run economic growth rate of just 1.8%.6 At the same time, 10-year U.S. Treasury yields, which often serve as a proxy for expected economic growth, sit near the lower end of their recent 2.8%–3.1% trading range.7
  • Thanks to recent tax changes and fiscal policies, economic growth may well be above trend in 2018. As the stimulative effects of these policies wear off over time, however, investors may need to position their portfolios for a low-growth environment over the long term.

1 U.S. Federal Reserve, https://bit.ly/2uAJJYx.
2 Macrobond, as of July 19, 2018.
3 U.S. Department of Labor, initial claims, https://bit.ly/2msvkcj.
4 Federal Reserve Bank of St. Louis, GDPNow, https://bit.ly/2NKrbNr.
5 Macrobond, based on data from the U.S. Bureau of Economic Analysis, as of July 19, 2018.
6 Federal Reserve Summary of Economic Projections, June 2018, https://bit.ly/2sY5hgK.
7 Federal Reserve Bank of St. Louis, 10-year Treasury Constant Maturity Rate, https://bit.ly/29ecBfp.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.