If we required a reminder that the United States is more fully integrated into global economic and financial markets than ever, we received it by way of the latest turmoil in U.S. equity markets. By many measures, valuations had become stretched, so in some respects the markets were looking for a reason to correct. However, there is no doubt that the recent market anxiety was at least “assembled” in China, with components from the global supply chain, before being imported into the U.S.

Nevertheless, recent data on housing, consumer confidence, auto sales, capital goods orders and PMIs all point to underlying strength in the U.S. economy. Even the second quarter was stronger than previously thought with GDP growth being revised up to an annual rate of 3.7 percent. More impressively, final sales to domestic private purchasers rose at an annual rate of 3.3 percent, an upward revision from the first estimate of 2.5 percent.

So, where does this leave us? On balance, the U.S. economy is expanding at a 2.5 percent to 3.0 percent pace, but downside risks to the outlook have risen due to the correction in U.S. equities and financial sector stress. Equity market anxieties will knock just 0.2 to 0.3 percentage point off of U.S. GDP growth over the next four quarters.