Weekly Economic Update

Economic Update 2-21-2017

  • In a busy week for economic releases, several manufacturing indexes shined with strong results, inflation came in stronger than in recent months, and housing numbers were a bit mixed.
  • U.S. equity markets again showed strong gains, although foreign stocks also came in positive.  Bonds were flattish with little changes in interest rates, although high yield bonds continued their momentum.  Commodities fell on the week, although crude oil prices were little changed.

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Weekly Economic Update

Economic Update 2-13-2017

  • In a very light week for economic data, import prices were relatively contained, sentiment fell a bit, labor metrics JOLTs and jobless claims continued to show strength.
  • Equity markets gained during the week, in the U.S. and even more so abroad.  Bonds also fared well, with interest rates ticking down.  Commodity prices rose a bit, despite a stronger dollar, with oil ending flattish on net.

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Weekly Economic Update

Economic Update 2-06-2017

  • Economic data for the week was highlighted by a Fed meeting marked by no action, stronger ISM manufacturing data and employment, with middling non-manufacturing, housing and consumer confidence data.
  • Equity markets experienced a mixed, flattish week on net, with emerging markets leading the way with stronger returns.  U.S. bonds were generally flat, while foreign bonds and commodities gained in line with a weaker dollar during the week.

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Fed Note

Fed Note

It wasn’t expected for the Fed to take any action at their meeting concluding today, so there were no disappointments (i.e. nothing happened from an interest rate standpoint, by unanimous vote).

Their formal statement reflected their views that the economy is continuing to expand at a ‘moderate’ pace, coupled with ‘solid’ labor growth. Overall, the language wasn’t altered much from December, but improvement was noted in consumer and business sentiment as well as higher inflation, despite continued low inflation expectations.

In looking at the dashboard of Fed mandates, the numbers similarly haven’t largely changed from the end of 2016, but we could be seeing more of a gradual evolution in a few areas, that may or may not be jump-started by stronger post-election business sentiment and/or legislative/fiscal action.  The baseline case appears to be 2-3 rate hikes in 2017, perhaps spread out to about one per quarter or so, but that is certainly subject to change based on data releases and other conditions.

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Weekly Economic Update

Economic Update 1-30-2017

  • Economic data for the week was focused on a somewhat lackluster GDP report for the 4th quarter, along with mixed durable goods data and poor housing results.
  • U.S. and developed foreign equities experienced gains for the week, with emerging markets gaining even more strongly.  Bonds were flattish with minimal net changes in interest rates for the week, while commodities were mixed as crude oil prices changed little for the period.

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Weekly Economic Update

Economic Update 1-17-2017

  • For the week, economic data included moderate retail sales, some gains in producer prices, stronger small business sentiment and continued strong labor results.
  • Stock markets were mixed on the week, with foreign equities outperforming U.S., with help from a weaker dollar.  Interest rates ticked downward, which helped bonds earn slightly positive returns.  Commodity returns were also mixed, as crude oil prices ended down a few percent.

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Weekly Economic Update

Economic Update 1-09-2017

  • In the first week of the year, a variety of economic data releases pointed to continued expansion, including the ISM manufacturing and non-manufacturing indexes.  The employment situation report for December, however, was decent but didn’t meet expectations.
  • Equity markets in the U.S. and abroad gained in the first week of the year.  Bonds also rose to a lesser degree as interest rates declined.  Commodities were mixed, with oil rising slightly for the week.

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Weekly Economic Update

Economic Update 12-27-2016

  • Last week’s economic data was highlighted by a slightly-better-than expected durable goods report, stronger housing numbers and a 3rdquarter GDP that was revised to higher growth than expected.
  • It was a slow pre-Holiday market week, with equity markets modestly higher.  Bonds offered equally strong returns as interest rates backed off of highs from the prior week.  Commodities declined slightly, with oil little changed for the week.

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Weekly Economic Update

Economic Update 12-19-2016

 

  • Economic news for the week was highlighted by the Federal Reserve raising short-term interest rates by another quarter-percent, as expected.  Retail sales disappointed, while several regional manufacturing surveys and homebuilder sentiment showed far stronger results and inflation ticked slightly higher.
  • U.S. stock markets were mixed, with large-caps outperforming small-caps.  In foreign markets, developed markets experienced stronger gains but were held back by a stronger dollar.  Bonds suffered again as interest rates rose in keeping with more anticipated Fed moves next year.  Commodities gained a bit as oil finished higher along with expected production declines.

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Fed Update

Fed Note 12-14-2016

The probabilities of the Fed taking action at this December meeting were quite high (in the range of 95-100%), and the FOMC didn’t disappoint, raising the target Fed Funds rate to 0.50-0.75%.  With strengthening economic data, or at least not weak enough to not proceed, this has been a foregone conclusion for several weeks.  There were no dissenting votes at this meeting.

 The official statement noted that the economy has been expanding at a ‘moderate’ pace, with gains in labor and household spending, while business fixed investments has remained soft.  Inflation increases were also noted, despite levels remaining below the Fed’s target; however, levels are expected to rise as energy price effects trail off and labor improvement finds its way in.  Estimates for the ‘dot plot’ of economic growth and inflation both saw slight increases, to the point where three additional rate hikes are implied in 2017; longer-term estimates beyond the next year or two are similarly little changed.

 

In looking at the mandate dashboard:

 

Economic growth:  The Trump election victory has raised expectations for fiscal spending and stronger sentiment due to plans for lower corporate and personal taxes and a generally more ‘business-friendly’ environment, which includes the potential for a loosening of regulations.  This scenario could help push further business capex spending, which is one key area that’s been significantly lacking in this recovery.  While the impact of a single election is usually limited, the unleashed ‘animal spirits’ could perpetuate a snowball effect of stronger confidence and spending, which can turn into tangible economic growth effects.  At the same time, even policy changes and improved sentiment can’t perform miracles by turning the tide of a secular slower growth tide globally, led by demographics in many cases and fewer ‘easy gains’ from larger developing nations like China, as these evolve into more complex economies.

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Weekly Economic Update

Economic Update 12-12-2016

  • In a light week for economic data, the ISM non-manufacturing index ticked higher into very strong territory, while JOLTs and jobless claims showed continued strength.
  • Equity markets gained again as post-election sentiment and hopes for higher growth continued to drive returns.  Bonds were mixed as treasury interest rates ticked upward, penalizing long debt and rewarding corporate credit particularly in high yield and bank loans.  Commodities gained slightly with mixed results in a variety of assets, including oil.

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Weekly Economic Update

Economic Update 12-08-2016

  • Economic data for the week was highlighted by improvement in several manufacturing releases, as well as in consumer confidence.  Friday’s employment situation report came in not far from expectations, surprising neither on the upside or downside but appeared likely strong enough to keep the potential Fed rate increase in play for December.
  • Equity markets took a breather in the U.S. and abroad, following post-election positivity.  Bond returns were flattish, while commodities gained due to oil prices jumping significantly after announced OPEC production cuts.

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