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The US economy is continuing its long recovery process from the financial crisis that erupted
in September 2008. Economic growth in the year to September 2013
was 2.8%, with expectations for 2014 of growth at a similar rate.
At the same time the pace of inflation remains very modest at just over 1%.
One of the primary sources of this growth is a recovery in the housing market, with
construction activity and prices up strongly over the year.
The job market is also improving, with the unemployment rate down to 7.0% in November
2013, from 7.9% at the start of the year and a peak of 10% in October 2009.
This better economic performance has been reflected in asset markets, with the broader
equity market up over 23% year to date. The economic recovery has now reached the
point, however, where the US Federal Reserve is openly discussing a reduction in its bond
purchase stimulus program -- also known as QE3.
Currently the US Fed is injecting 85 billion US dollars into the economy each month through
bond purchases, with the official interest rate at zero.
Sometime over the next few months the US Fed will start reducing this program and will
likely bring it to an end late in 2014. The US economy and markets will then, therefore,
need to maintain their own momentum, without extra help from the US Fed.
Official interest rates are, however, expected to remain very low, with the first actual
interest rate hike not expected until late in 2015.
US equities and the US dollar are likely to remain well supported through 2014 as the
US economy continues its long recovery, even as the Federal Reserve begins to reduce some
of its stimulus.