This morning, Federal Reserve Chairman Ben Bernanke gave his midyear Fed economic report that can affect exchange traded funds (ETFs) and investors’ investment decisions.
Bernanke’s good news: The economy is growing.
Bernanke’s bad news: The economy is growing but at a slower pace than previously predicted in February. Also, inflation concerns will continue to be a thorn in everyone’s side through the year, according to the Associated Press.
Some of Bernanke’s chief concerns included:
- Energy and commodity prices could continue to increase, which would increase the prices of other goods and services, and in turn cause inflation.
- The housing market’s performance could get worse. That could have a variety of repercussions including declines in consumer spending, stagnation in economic growth and declines in home construction.
So what does this mean for ETF investors?
If energy and commodity prices increase, then the oil services and equipment providers will continue to reap the benefits. While our economy is growing at a moderate pace, other regions are experiencing rapid growth. Similarly, although the value of the dollar is dropping, other currencies are benefiting from this. Finally, although Bernanke’s report gives a bleak forecast for the housing market and related sub-sectors, at least the suggested downward trend doesn’t come as a big surprise.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.