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Investing Specialists

U.S. Economy: A One-Trick Pony

The consumer-related categories have been the only engines really driving economic growth, writes Morningstar's Bob Johnson.

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It wasn't a great week for world markets, with most equity markets down 0.2% to 2.0%, and bond yields down also, with the 10-year U.S. Treasury yield sliding to 1.82% from 1.89%. These moves seemed to be a result of an uninspiring corporate earnings season and soft economic news out of the U.S. Poor  Apple (AAPL) results and down iPhone sales certainly didn't help technology stocks. Oddly, commodities, which usually move markets in the same direction, had a great week, with commodities, gold, and oil all up over 3%. We didn't see any real news on that front. Nevertheless, some decent weekly oil price gains added up to a full 20% jump in oil prices in April. Good news for oil companies and equipment producers--not such great news for consumers.

Central banks were in the spotlight again this week, too. The Bank of Japan refused to provide more monetary easing at its most recent meeting, and the U.S. Federal Reserve managed to not say much at all at this week's meeting. The Japanese announcement had meaningful market impact and caused the U.S. dollar to weaken further. Unfortunately, central bankers are having increasing difficulty fighting slowing demographic growth pressures with easy money policies. Also, with so many countries adopting similar policies, it hasn't provided some of the currency depreciation benefits that helped earlier adopters of easy money policies.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.