Jeffrey Lacker discussed the US economy’s outlook
Jeffrey Lacker's perspective on the US economy's economic outlook (Part 1 of 12)
Jeffrey Lacker spoke about economic outlook
Jeffrey Lacker is the chief of the Federal Reserve Bank of Richmond. On January 9, he spoke about his take on the economic outlook in the US. He spoke in Richmond.
Lacker discussed his outlook on economic indicators—like GDP (gross domestic product), consumer spending, population growth, unemployment, and inflation. He also took the opportunity to highlight the three key challenges that the US economy is currently facing. Lacker concluded with his views on the FOMC’s (Federal Open Market Committee) guidance on raising the federal funds rate.
Economic conditions are reflected by the market
Broad market ETFs—like the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 (IVV)—track the S&P 500 Index. The index measures how the US equity market’s large capitalization sector performs. The S&P 500 Index uses a market capitalization weighting structure. It invests in the 500 largest US firms—including companies like Apple (AAPL), ExxonMobil (XOM), and General Electric (GE). Companies that are a part of this benchmark index have a 50% public float as a precondition. As a result, ETFs that follow this index are highly liquid. Also, they’re heavily traded.
Since these ETFs represent the US economy, any major upswing or downswing in the economic conditions is immediately reflected in the funds’ market performance. For example, SPY and IVV dipped by about 40% each from January 2008 to January 2009. They decreased because of the financial crisis in the US.
Why economic outlook is important
An economic outlook tells investors what to expect. We’ve discussed how funds’ performances are affected by market movements. Often, the movements are stirred by major economic events. As a result, a preview of expected near-term economic conditions will help investors plan, reevaluate, and attune their investments accordingly.
In this series, we’ll discuss the key takeaways from Jeffrey Lacker’s speech on economic outlook. We’ll give you a preview of the economic conditions that are expected in the US.
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