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What October Manufacturing Tells Us about Developed Markets

PART:
1 2 3 4 5 6 7 8 9 10 11 12
Part 11
What October Manufacturing Tells Us about Developed Markets PART 11 OF 12

Could the US 3Q17 GDP Data Speed Up the Market Rally?

US GDP in 3Q17

According to the US Bureau of Economic Analysis estimates, GDP in the US saw an annualized growth rate of 3% in 3Q17, which beat the market (VOO) (IWM) expectation of 2.5%. In 2Q17, the US economy posted an annualized growth rate of 3.1%. The stronger growth in 3Q17 is strengthening investor confidence in the US economy.

Could the US 3Q17 GDP Data Speed Up the Market Rally?

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Components of GDP

Personal consumption expenditures, exports, and nonresidential fixed investments all provided positive contributions to the US GDP growth in 3Q17. However, local government spending and residential fixed investments fell marginally.

Improvements in trade value added more to economic growth in 3Q17. Exports rose 2.3%, while imports fell 0.8%. Consumer activity also improved at a higher rate.

Market impact

The broader market S&P 500 Index (SPY) has risen nearly 15.6% on a YTD (year-to-date) basis as of November 7, 2017. In the past three quarters, US economic growth has also supported market movements. Major economic indicators such as inflation, the condition of the labor market, manufacturing, and services activity have all shown improved figures in past months.

These improvements among the fundamental factors and in business confidence are supporting market movements, while reform agendas appear to be boosting the current market rally in the US. If tax reform is able to pass through the various divided factions of US Congress, we may see a further boost in economic growth and in the US labor market.

In the next and final part of this series, we’ll analyze the key indicators that investors will be watching this week.

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