Raise a glass and toast the U.S. Economy in 2015!
As investors ring in the New Year they should also raise a glass to toast the U.S. economy which is finally on solid footing. “We go into 2015 and put the very bitter memory of 2007, 2008 behind us.” said Mark Hamrick, Washington Bureau Chief, at Bankrate.com.
With the national unemployment rate down to 5.8%, Hamrick also notes many Americans will begin the new year gainfully employed. “The economy has really done a great job of damage repair, with acceleration here recently with the quality of jobs being added.” Employers are expected to continue adding workers in 2015 at a monthly pace of 219,000, according to economists surveyed by Bankrate.com.
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More jobs will likely bring the unemployment rate down to 5.5%, while boosting U.S. economic growth by nearly 3% over the next 12-months, as detailed in this snapshot from Bankrate.com’s survey of economists.
85% of those economists also expect the Federal Reserve to raise interest rates. “They do expect a rate hike around June 2015,” says Hamrick who also notes consumers should brace for higher borrowing costs. “Which in some ways is counter intuitive because Treasury yields have remained so low.” On average, economists see the yield on the 10-Year Treasury note, the benchmark for interest rates charged to consumers, rising to 3.17%.
That being said, Bloomberg News reminds us in an article strategists had predicted higher yields in 2014 but that never happened. Global turmoil in Russia, Japan’s recession and weaker economic growth in Europe propped up demand for the safety of U.S. government debt driving yields down to 2.19%.
As a result, U.S. government securities have returned 5.9% this year, according to the Bloomberg U.S. Treasury Bond Index, now on pace for the biggest annual gain since 2011. There is a good chance bond investors will stick with the U.S. as we begin the new year.
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