Interest rates are going up, with treasuries leading the way. This week the 10-year Treasury bond has risen to over 3%, a milestone in the long road to recovery from the bottom of the crash. The US economy is strong enough to support such an advance, but there are indications that the strength of the economy is fading somewhat. Just how severe the weakening has become is not yet clear. Higher rates will affect growth. The Fed has not yet given any signals as to where it wants interest rates to go. The Fed under its new leadership has merely indicated that at least two more rate hikes are envisioned this year.

The higher interest rates have severely affected the US stock market. The Dow Jones index has plunged to the 23,000 range from a peak of 26,000. The market is expected to continue to weaken for the foreseeable future. The decline could accelerate as the Trump administration continues to follow their current policies.

Meanwhile, there are indications that the US economy has begun to show some soft spots while inflation has remained very low. The GDP numbers are to be released April 27. Expectations are that the growth rate will be quite contained. An increase of more than 2% in Q1 is unlikely. If the growth rates are this low we should see the Fed take a step back from its planned rate hikes in the near term.