Transcript:
Tom Vaughan:
Hello, everybody, welcome to Thursday. The S&P 500 was up a little bit more than .4% today. And really the big news was the Gross Domestic Product number that came out. So, the expectation was that we would see 8.4% growth in our Gross Domestic Product, which is kind of the overall production of the country. The number came out at 6.5%, which is a pretty big miss actually. And normally the market will go down, but the market went up today. And so there’s a couple things going on here, that are causing that. Number one, 8.5% expectation is a really, really big number, actually. I mean, our average Gross Domestic Product growth on a quarter basis is about 3%. And so to see something that big is kind of fascinating, all by itself.
As an expectation, and even with the reality of 6.5%, that’s still a big number. But what happened, of course, was we had a giant drop in the Gross Domestic Product in the first three quarters of last year, and we’ve been recovering from that; so that’s a really good thing. And we’re doing a really solid job of recovery. But, the reason the market went up, even though we came in lower than expectations, is because the biggest fear right now is inflation. And so things are opening up very quickly, and there’s lots of government stimulus coming in, and there’s lots of pent up demand coming off the sidelines from consumers. The fear was that things would get too expensive, and that would cause the Federal Reserve to have to move sooner than expected, and that’s something that the market has struggled with in the past.
And so when the Gross Domestic Product comes in at a little bit lower number, it just makes the market feel like the Federal Reserve won’t have to move right away. You can tell really where things go with the market; if you if you pay attention as far as that goes. So, not a bad day actually and is up sort of, again. With the economic growth: You want economic growth, but you don’t want too much, and you definitely don’t want too little. You don’t want it to be shrinking, like we had in 2008, and those types of things.
So, this is not a bad environment, right now: It continues to be a good environment, earnings are pretty decent. Companies are buying back stock, there’s dividends that are being increased. The Federal Reserve: Some of the pressures coming off of them, to do things sooner than later. Unemployment as a whole has been improving, and so really, if you look at all of the basics, for what’s happening right there.
Now, remember that the bond market has been falling in yield: The 10 year Treasury has been falling in yield. And I’ve been saying for a while, that the Treasury market is a pretty good predictor of what’s happening. So, it went from 1.75% down to really about 1.25% now, which is a fairly big drop. And what it’s saying is essentially, that the economy’s not going to grow as fast as they thought, say back in March, when that hit 1.75%; and that’s exactly what’s happening. So, if you watch the 10 year Treasury market, it’ll give you some good ideas for what’s happening in terms of economic growth, at least in the short term. So the expectations were for a much higher growth that we haven’t seen, and I think that’s better. My biggest fear is this just gigantic growth: We still might have it at some point in the future here, as things settle down, we figure out what to do with this Delta Variant, and those types of things, as far as that goes. The market’s still in a really good spot, and I look forward to seeing what’s going to happen tomorrow. Tomorrow, I’ll be doing my weekly summary. If you want to join me at Talk Money with Tom, I’d be happy to have you ask questions and fill in, we’re gonna have a good time with that like we normally do. So, look forward to talking to you tomorrow. Thank you.