Despite Uncertainties the U.S. Economy Powers On

• New York Fed and Atlanta Fed nowcasts project Q2 GDP growth at 2.7% and 3.3% respectively, significantly higher than Q1's 1.6% annualized growth
• June employment report showed strong job gains with the six-month moving average trending upward after February's losses
• Private fixed investment in structures, equipment, and R&D has been growing for years, with AI-related infrastructure spending now filtering into the physical economy and benefiting industrial manufacturing, electrical equipment, and energy grid sectors

Summary

Despite global geopolitical uncertainties and Middle East conflicts, the U.S. economy is demonstrating accelerating growth in Q2 2024 after a weak start to the year. Real-time GDP forecasts from the New York Fed and Atlanta Fed project Q2 growth at 2.7% and 3.3% respectively, significantly higher than Q1's 1.6% annualized growth. Official Q2 GDP data will be released in late July.

Key Economic Indicators:

• June employment report showed strong recovery following February job losses, with the six-month moving average trending positively
• Private fixed investment continues multi-year growth trajectory, driven by infrastructure development and AI-related capital spending

Sector Highlights:

The U.S. infrastructure buildout is significantly impacting economic growth, particularly in industrial manufacturing, electrical equipment, and energy grid infrastructure. AI investments have evolved beyond software into substantial physical capital expenditures. These investments are expected to enhance long-term worker productivity and moderate inflationary pressures.

Investment Strategy:

Shelton Capital Management maintains an overweight position in U.S. equities, specifically favoring:

• Sectors: Financials (regional banks), industrials, and information technology
• Fixed Income: Increased exposure to mortgage-backed securities, belly of yield curve, and high-quality asset-backed securities
• Alternatives: Equity option overlay strategies and multi-asset real return strategies

Market Outlook:

The firm's Cash Indicator remains below long-term median levels, suggesting market confidence. Recent equity volatility is characterized as a "healthy reset" rather than warning signal. Analysts project the next decade could see U.S. economic growth rivaling the 1990s boom, with current volatility presenting selective opportunities for investors.