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Weekly Economic Update

Fed Note:

As expected, the Federal Reserve Open Market Committee lowered the fed funds rate a second time by 0.25%, to a new range of 1.75-2.00%. There were a few dissents, strangely in opposite directions, with one member wanting a larger 0.50% cut and two others voting for no cut.

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Weekly Economic Update

Economic Update 9-18-2019

 

  • Economic news for the week included largely-as-expected results for the producer price index and consumer price index, while retail sales surprised to the upside, and labor metrics were mixed.
  • Global equity markets gained on the week, as trade sentiment moved to optimistic once again. Bonds, however, suffered as interest rates corrected sharply higher with flows away from risk. Commodities markets were mixed, as crude oil lost ground, offsetting gains elsewhere.

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Weekly Economic Update

Economic Update 9-09-2019

  • Economic news for the week included positive results for the ISM services index, while the ISM manufacturing index contracted. Employment results were mixed, with the nonfarm payroll report somewhat slower than expected.
  • Equities rose on optimism for a trade resolution last week, both in the U.S. and abroad. Bonds, however, lost ground as interest rates ticked higher. Commodities gained a bit, led by sharply higher prices for natural gas.

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Weekly Economic Update

Economic Update 9-03-2019

  • Economic news for the week included a slight revision downward in U.S. GDP for the prior quarter, stronger than expected results for durable goods orders and personal spending, while jobless claims and consumer confidence weakened.
  • Equity markets in the U.S. and overseas rose on stronger sentiment and hopes about trade talks making progress. Bonds also gained, although interest rate changes were less dramatic than in recent weeks. Commodities rose generally, although the performance of the sub-groups was mixed.

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Weekly Economic Update

Economic Update 8-26-2019

  • In a lighter week for economic news, the index of leading economic indicators reversed course and showed a monthly gain—lowering odds of an upcoming recession. Other positive news included existing home sales coming in better than expected, while new home sales declined, but largely due to positive revisions from the prior month.
  • U.S. equity markets lost ground worldwide as trade tensions continued to vacillate, while foreign stocks fared slightly better. Bonds were flat to higher as interest rates changed minimally on the week. Commodities lost ground, primarily in the agricultural and industrial metals segments, while precious metals fared well.

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Weekly Economic Update

Economic Update 8-19-2019

  • Economic data for the week included positive reports in retail sales, several regional manufacturing surveys, and a combination of several labor statistics. On the disappointing side were industrial production, housing starts, and jobless claims, which ticked up on the week.
  • Global equity markets in both the U.S. and overseas endured a volatile week, with several high percentage days in both directions, but ending only about a percent lower on net. Bonds fared more positively on the investment-grade side, due to lower interest rates and flows away from risk. Commodities were mixed to lower, mostly due to lower grain prices.

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Weekly Economic Update

Economic Update 8-12-2019

  • Economic news for the week included weaker but still-positive numbers from the ISM non-manufacturing index, tempered producer prices, and a strong jobless claims report.
  • U.S. equity markets declined around the world, with trade tensions again escalating early in the week, before subsiding somewhat. Bonds fared well in the aftermath of poor risk asset performance, as interest rates declined across the yield curve. Commodities were mixed, as price declines in energy offset gains in precious metals.

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Weekly Economic Update

Economic Update 8-05-2019

  • Last week saw the Federal Reserve reduce interest rates, largely as expected, although the official statement language was mixed. Positively, consumer confidence rose last week, as did personal income and housing, while manufacturing results showed some weakness. The employment situation report for July came in largely as expected, showing decent growth, although the pace of improvement has slowed.
  • Equity markets in the U.S. and abroad declined several percent during the week, due to announcements of new tariffs on China and Fed policy language being less accommodative than expected. Conversely, bonds fared very well as interest rates across the yield curve declined sharply. Commodities also declined on net, with energy and industrial metals falling in price.

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Fed Update

Fed Note:

The July FOMC meeting resulted in a 0.25% reduction in the federal funds rate, to a new range of 2.00-2.25%. The policy vote was far from unanimous, with eight members supporting the change, and the Fed presidents from Kansas City and Boston each dissenting. This reflects the varied commentary from members in recent weeks as to the necessity of the cut. This was the first rate cut since December 2008, when circumstances were obviously far different from those seen today.

The formal statement reflected the Fed’s newly-adopted dovish stance, notably the persistently muted inflation and ‘implications of global developments.’ The Fed also announced that it would end its balance sheet drawdown in August—two months before they’d planned. Other language was little changed from June, with economic activity noted as ‘moderate,’ and labor market as ‘strong,’ but inflation remaining low, and business fixed investment still ‘soft.’

This was a move largely expected by financial markets, although the magnitude of the move remained in doubt until recently, when fed funds futures odds pegged the smaller change at 80%. Current futures probabilities put the best odds at two additional cuts by December. Despite the change in tone this year, manifesting in today’s change, the primary Fed mandates remain somewhat conflicted:

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Weekly Economic Update

Economic Update 7-29-2019

  • In a slower week for economic data, gross domestic product for the second quarter, durable goods orders, and jobless claims each came in better than expected. Several housing statistics continued to point to mixed conditions.
  • U.S. equity markets fared well with positive returns, outperforming foreign stocks, which were held back by a stronger dollar. Bonds were generally flat on the week, with credit outperforming governments, and foreign markets mixed. Commodities lost ground broadly, due to the dollar effect, although energy was the sole exception as crude oil prices ticked modestly higher.

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Weekly Economic Update

Economic Update 7-22-2019

  • Economic data for the week included positive surprises in retail sales as well as several regional manufacturing surveys, mixed results in industrial production and housing, while the index of leading economic indicators pointed to weakening conditions.
  • U.S. equity markets declined as earnings season kicked off for the most recent quarter.  Foreign stocks fared slightly better, despite a stronger dollar.  Bonds gained as investors moved away from risk during the week, and the Fed continued to hint at lower interest rates.  Commodities declined as prices for crude oil and natural gas declined sharply.

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