Weekly Economic Update

Economic Update 9-26-2016

  • Economic data for the week was largely focused around the FOMC meeting, where no interest rate policy action was taken.  Several housing metrics came out during the week, to mixed results, with stronger pricing and homebuilder sentiment, but weaker sales volume and starts/permits.
  • Stock markets rose globally with Fed policy holding steady, and Japan going a bit further, although gains were stronger abroad than domestically.  For similar reasons, bonds fared well on the week with the decline in interest rates.  Commodity indexes gained, led by a rise in oil prices.

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Fed Update

Fed Note:

The September FOMC meeting ended with no action.  For those hoping for some activity after some hawkish Fedspeak, this proved again to be a disappointment, but was not really a surprise for most.  Three members did dissent on this lack of action—wanting a rate hike now—and the statement alluded to a rate hike being likely in the near future, after ‘further evidence of continued progress towards its objectives’.  Risks were described as being roughly balanced, with overall growth picking up somewhat from earlier in the year, strong labor and household spending, but weaker business investment (more on these below).

Once a quarter, including for this meeting, released materials included additional projections for economic growth and inflation, as well as the ‘dot plot’, a graph introduced in 2012 as a way of showing anonymous FOMC member interest rate projections for the coming year and beyond.  These projections have been inconsistent, as growth, inflation and rates have all fallen short of expectations.  Actually, there’s been some call for the Fed to drop the dot plot, since these haven’t been very accurate, and the constant tweaks seem to be creating more confusion than they’re alleviating.  Continue reading

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Weekly Economic Update

Economic Update 9-19-2016

  • There were a flurry of economic data releases last week, with results tilted toward the negative—included were disappointments in retail sales and manufacturing, while consumer sentiment was a little better than expected, and jobless claims remain very low.  Inflation also remains flattish, in line with the recent cyclical trend.
  • Equity markets experienced more volatility than during the last few summer months, but gained a bit on net in the U.S., while generally losing ground overseas.  Bonds experienced a lackluster week as well, upon higher interest rates.  Commodities lost ground thanks to a weaker dollar and higher perceived oil supply conditions.

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Weekly Economic Update

Economic Update 9-12-2016

  • In a light week for economic data, the key release was a disappointing ISM non-manufacturing number, while JOLTs and jobless claims showed continued labor market strength.  A key question focused on by market participants is how these various reports will affect the probability of a Fed interest rate move in a few weeks.
  • U.S. equity markets declined, as did most investment-grade bonds, as a result of comments implying a sooner-than-later Fed interest rate move.  Foreign developed markets fell to a lesser degree, while emerging markets bucked the trend with gains.  Commodity markets rose with help from a weaker dollar and higher energy prices.

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Weekly Economic Update

Economic Update 9-06-2016

  • In a busy week for economic data, general results weren’t as strong as expected, but neither were there any outright trouble spots.  The ISM manufacturing index weakened by a few points, housing proved mixed but stable and the employment situation report disappointed a bit compared to expectations.
  • Equity markets generally ended up in the positive globally, as did domestic bonds, while foreign bonds were mixed due to a stronger dollar.  Commodities, led by oil, were generally down on the week.

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Weekly Economic Update

Economic Update 8-29-2016

  • Economic data for the week was decent with strong reports from durable goods, new home sales, and jobless claims while existing home sales came in a bit weaker.  Fed Chair Janet Yellen’s speech at the annual Jackson Hole conference alluded to a desire to perhaps boost rates sooner than year-end.
  • S. equities declined on the week with a higher probability for rate hikes, while foreign stocks generally fared better.  Bonds were also relatively flattish in both the U.S. and abroad.  Commodities were also hurt by the dollar with crude oil prices declining a few percent.

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Weekly Economic Update

Economic Update 8-22-2016

  • Economic data for the week showed a combination of strength in housing and jobless claims, continued mixed results in manufacturing, and tempered consumer inflation.  The FOMC minutes showed conflicting opinions, which has carried over into recent Fed member communications.
  • In continued low-volatility summer equity market activity, stocks were slightly higher in the U.S. and emerging markets, and lower in the developed markets generally, even with help from a weaker dollar.

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Weekly Economic Update

Economic Update 8-15-2016

  • Economic data for the week included a flattish/disappointing retail sales report and continued weak productivity, but, on the positive side, ongoing strong labor market metrics.
  • U.S. equity markets reached new highs again for the week, before pulling back to flattish returns; foreign stocks outperformed, with generally positive gains globally.  Bonds gained some ground with interest rates falling.  Commodities with help from a weaker dollar and higher oil prices.

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Weekly Economic Update

Economic Update 8-08-2016

  • Economic data for the week was highlighted by weaker than expected but still-expansionary ISM manufacturing and non-manufacturing reports, while the July employment situation report was much stronger than anticipated, pleasing investment markets.
  • Equity markets were higher in the U.S. and somewhat mixed globally.  Government bonds declined with interest rates moving higher, with the exception of high yield corporates, which gained.  Commodities were mixed with oil little changed on the week on net.

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Weekly Economic Update

Economic Update 8-01-2016

 

  • Economic data for the week was highlighted by no policy action at the FOMC meeting, while GDP for Q2 underwhelmed compared to expectations.  Housing numbers were relatively good with home sales reaching pre-recession levels.
  • U.S. equity markets were mixed, and were outperformed by foreign developed stock indexes which benefitted from a weaker dollar for the week.  Bonds generally gained some ground with lower interest rates.  Commodities fell as the price of crude oil fell to 3-month lows based on stronger inventories.

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Fed Note

Fed Note:

The July FOMC meeting came and went with no action.  This was of no surprise to investment markets, which didn’t expect anything.  Since there were no updated projections and no planned press conference, it implied the meeting was not going to be an ‘important’ one requiring additional clarification and Q&A with the press. 

The Fed’s statement acknowledged a strengthening of conditions in the labor markets and moderate economic expansion, including a frequent comment on stronger household spending but continued softness in business capex.  Importantly, the FOMC noted that near-term risks to the economic outlook have diminished, although global conditions continue to be under review.  Overall, the message was a bit more optimistic than some recent statements.  As has occurred in a few prior meetings over the past year, there was one dissenter (KC President George again), who wanted a quarter-point rate increase.

As of late, in the aftermath of Brexit, political uncertainty and lack of significant upside results in economic data like manufacturing and business spending, the calls for rate hikes have largely fallen silent.  Based on the Fed’s own estimates, and a variety of economic departments, the chances of some kind of rate hike towards the latter half of this year lie around 50%.  While September remains a possibility, December has looked to be at least equally likely, and, on the more extreme end, a well-known prominent firm or two have made predictions of no action until next year or even 2018. 

A look at the dashboard of current conditions:

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Weekly Economic Update

Economic Update 7-25-2016

  • In a slow week for economic news, home sales and housing starts surprised on the upside, while the index of leading economic indicators has shown some flattening of momentum as of late.
  • Stocks gained for the fourth straight week, as a flurry of earnings reports came in better than expected, with U.S. equities outperforming foreign due to a strengthening of the dollar.  Bonds ended up with generally tempered returns, as interest rate volatility calmed down from prior weeks.  Commodity prices slipped across the board, with oil ticking down a few dollars upon higher inventories.

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