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Sec. Janet Yellen sees economic growth slowing and lower inflation on the horizon

United States Secretary of the Treasury Janet Yellen says, barring any unanticipated shocks to the global economy, inflation in the United States should continue to recede over the next year.

How Do Americans View Higher Inflation?

1. Worry about inflation has now risen to the point where it is perceived by Americans as the top problem facing the nation. As my Gallup colleague Jeff Jones recently reviewed, mentions of inflation as the most important problem facing the nation averaged only 1% between 1990 and 2021. But such mentions zoomed to 18% in our latest May Gallup poll. Inflation is thus now essentially tied with issues relating to the way the nation is being governed as the top problem facing the nation.

There are several year-end tax tips to keep in mind. These include:

1. Maximize annual retirement plan contributions.Tax-advantaged retirement accounts are funded with pre-tax dollars and compound over time. You may make pre-tax contributions to a 401(k) up to $20,500 if you are under 50 and $27,000 for those 50 and over. If it is not possible to contribute the maximum amount, you can try to contribute any amount matched by your employer. The maximum yearly contribution for an Individual Retirement Account (IRA) is $6,000 (under age 50) and $7,000 (50 and over).

Global Economics Intelligence executive summary, October 2022

Growth rebounds in the United States The world’s two largest economies exceeded growth expectations in the third quarter of the year. The US economy rebounded to a GDP growth rate of 1.8% year over year, after two quarters of contraction. The US growth was supported largely by consumption and exports.

Investors have been better off staying fully invested

The best-performing portfolio over the past 120-year period stayed fully invested throughout both Democratic and Republican administrations. Those who invested exclusively during single-party rule by their preferred party or during divided government fared much worse. The more time investors dedicated to the markets, the better, and the less time they dedicated to politics the better.

Politicians don’t radically re-engineer the economy or dramatically alter economic growth

Investors are concerned that a political party might drastically re-engineer the economy. The economy has been remarkably consistent in terms of consumption, business investment, and government spending as a percentage of gross domestic product (GDP) across multiple governments. Economic activity, as measured by the median annualized quarterly percent change in US GDP, has been very similar under both single party and divided government rule.

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