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Enjoy The Final Ride, Because The Expansion Is Nearing An End

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Financial Sense

By FS Staff

We've seen volatility return, and we just rode through the first 10% correction in 2 years. This time on our weekly Big Picture segment, Financial Sense Newshour discussed where we are in the economic expansion and what we should plan for in the coming quarters.

Economic Growth Still Intact

The current economic expansion has run 8 years and 9 months long. Another year or two and it could end up being the longest economic expansion on record. If the stock market holds up as well, this could be longest stock bull we've ever seen.

Fixed investment is going up and consumer sentiment is at a record level. Productivity is starting to turn around, and the savings rate has declined from 6 to 2 percent.

Consumers are feeling more positive about their employment and financial situation, and they're also bringing down their savings, which translates into more spending.

On top of these positives, we're also seeing economic stimulus in the form of tax cuts and increased government spending to the tune of $300 billion, which we don't normally see at the end of a business cycle.

"These kinds of things are all coming into play at the same time," said Financial Sense's Jim Puplava. "The end result is all of this argues well for further economic expansion. … However, here's what you have to keep in mind. This is a late-cycle economic expansion, and it's going to bring about a change in Fed policy."

Inflation Set to Rise, Interest Rates Will Follow

Last year was the first year in which the Fed actually raised interest rates three times, and it's widely anticipated it'll go three times this year or possibly four if inflation picks up.

"Investors need to understand, the time to be complacent about your investments in the

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Cited by Barron's as one of the top financial websites to visit on the weekend, Financial Sense (www.financialsense.com) provides educational resources to the broad public audience through a daily podcast, editorials, current news and resource links on salient financial market issues. Begun in 1985 as a local talk radio program, Financial Sense Newshour (www.financialsense.com/financial-sense-newshour) is a weekly webcast with host Jim Puplava and top financial thinkers. Writing staff of Financial Sense includes: Jim Puplava, Chris Puplava, Ryan Puplava, and Cris Sheridan.

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Comments (2)

Thanks for the precise explanation. Right on about the shift in market and economic cycle.
The key to the economy and the Fed action is the inflation expectation, the key to the inflation expectation is the globalization and tech. As long as we allow the technology to continue innovate, and as long as we don't kill the globalization, the inflation expectation will stay low, this expansion will last at least 2 more years. Otherwise, God knows what will happen.
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