Investors continue to be rewarded for holding higher risk assets as economic growth remains strong, consumer spending remains strong, and corporate profit growth is robust. Both U.S. and international equities posted strong gains in the quarter and riskier parts of the bond market led the way. Despite the enthusiasm, there are a few clouds on the horizon. Inflation has remained more persistent than expected and consumer confidence is moderating in the face of higher interest rates and an upcoming election. Over the long-term, the growing federal debt will likely slow economic growth and annual budget deficits will need to be brought to sustainable levels.
"A national debt, if it is not excessive, will be to us a national blessing; it will be a powerful cement of our Union. It will also create a necessity for keeping up taxation to a degree which, without being oppressive, will be a spur to industry."
Alexander Hamilton
