Weekly Economic Update

Economic Update 5-22-2017

  • Economic data for the week was highlighted by some mixed regional manufacturing results, stronger industrial production, a drop-off in housing starts, and jobless claims that continue to run at very low historical levels.
  • U.S. stocks declined during the week along with more controversy surrounding the president, while foreign equities gained due to the drop in the value of the dollar.  Bonds fared well with investors seeking out safe haven assets, resulting in lower interest rates.  Real estate also gained, as did commodities, with oil prices rising on the heels of extended OPEC supply cuts.

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Weekly Economic Update

Economic Update 5-15-2017

  • Economic data for the week was highlighted by a disappointing gain in retail sales, while consumer sentiment improved, jobless claims provided their best showing in almost 30 years, while inflation numbers were mixed but generally showed tempered gains.
  • U.S. equity markets lost ground, while foreign markets experienced a positive week.  Bonds were up slightly with rates ticking downward, and commodity indexes rose due to an increase in energy prices.

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Weekly Economic Update

Economic Update 5-8-2017

  • Economic data for the week was highlighted by a decline in but still-strong ISM manufacturing numbers, continued strength in ISM non-manufacturing, and continued strength in labor metrics, including the April employment situation report.  The FOMC meeting resulted in no policy action, which was as expected, although chances for a June rate increase appear to have again risen.
  • Equity markets rose over the week, with foreign stocks in Europe especially strong with sentiment improving prior to the French election.  Bonds pulled back a bit in the U.S., as rates rose, while foreign bonds benefitted a bit from a weaker dollar.  Commodities generally lost ground due to continued weakness in crude oil prices.

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Fed Note

Fed Note:

The May Fed meeting was a ‘minor’ one, with no press conference or economic projections, so was not considered to be one with a high probability of action.  This ended up being the case, with the Fed Funds rate being maintained at 0.75-1.00%, per the bump higher in March.  The formal statement acknowledged that the labor market has continued to strengthen, despite a slowing in economic activity.

With conditions holding steady, many economists are seeing the odds of another rate hike in June at better than 50%, with those chances remaining data dependent, as usual.  Aside from growth and labor market information received between now and then, the fiscal situation in Washington remains a wildcard, with any success in pro-business legislation likely providing a boost to broader economic growth and risk asset markets perhaps, while inaction could keep pushing out the timeframes for these catalysts.  Progress has been slower than expected, which could partially be due to the personalities involved and partially due to Washington business as usual.

The dashboard of Fed items is little changed from March:

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Weekly Economic Update

Economic Update 5-01-2017

  • Economic data for the week were highlighted by a weaker-than-expected result for 1stquarter GDP, and disappointing sentiment data, while housing ended mixed and jobless claims remained low.
  • Stock markets rose globally, with help from results from the French presidential election that favored a conventional, pro-euro candidate.  Bonds declined a bit on the U.S. investment-side, but high yield and foreign debt fared well.  Commodities were mixed, as oil prices were little changed during the week.

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Weekly Economic Update

Economic Update 4-24-2017

  • Economic data for the week showed slower but still-strong results in regional manufacturing and production, while housing metrics were mixed.
  • Stock markets gained globally, led by the U.S. and Japan, while other markets generally came in flatter.  Bond returns were flattest of all, with minimal changes in interest rates for the week.  Commodities lost ground along with oil prices declining due to higher supplies.

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Weekly Economic Update

Economic Update 4-17-2017

  • Economic data for the week consisted of unsurprisingly weaker retail sales, lower inflation readings via the consumer price index and producer price index, as well as continued strength in labor markets.
  • Equity markets lost ground in the U.S. for the most part, while developed and emerging foreign markets generally were flattish.  Bonds fared well in that anti-risk environment, as did real estate, while commodity indexes also gained with help from higher crude oil and gold prices.

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Weekly Economic Update

Economic Update 4-10-2017

  • Economic reports for the week came in mixed, with slightly weaker ISM manufacturing and non-manufacturing data, although both remained strongly expansionary.  While the ADP employment report was quite strong, the government nonfarm payrolls report was far less so, while the unemployment rate declined.
  • Equity markets were mixed with flat to lower results in the U.S., with large-caps holding up much better than small, and better results from emerging markets than developed.  Bonds gained a bit with interest rates ticking downward a bit, but foreign assets of all kinds held back by a stronger dollar.  Commodities edged upward along with higher prices for crude oil.

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Weekly Economic Update

Economic Update 4-04-2017

  • Economic data for the week was highlighted by stronger manufacturing and housing results, an improvement in consumer confidence to a multi-decade high, while Q4 GDP was revised slightly higher than in earlier releases.
  • Equity markets in the U.S. gained, developed markets ended flattish on net and emerging markets lost ground.  The majority of bond indexes were flattish, with very little interest rate movement, while commodity indexes gained generally with a bounce higher in crude oil prices.

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Weekly Economic Update

Economic Update 3-27-2017

  • In a lighter week for economic data, durable goods and housing data were mixed, while jobless claims rose due to winter weather in parts of the country.
  • U.S. stocks declined in line with political disappointments surrounding health care reform, while foreign equities were helped somewhat by a weaker dollar.  Bonds fared well as flows moved away from risk and interest rates declined, with foreign outperforming domestic.  Commodities declined generally with weakness in crude oil prices due to supply concerns.

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Weekly Economic Update

Economic Update 3-20-2017

  • It was a busy week for economic data, as the FOMC raised interest rates by a quarter-percent, manufacturing data came in decently, inflation ticked a bit higher, and housing results and labor data came in stronger.
  • U.S. equity markets ticked modestly higher on the week, but were outpaced by foreign stocks, and especially so by emerging markets.  Bonds also experienced a decent week, as interest rates declined somewhat.  Commodity prices rose with strength in metals, a weaker dollar and slight recovery in crude oil.

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Fed Note

Fed Note:

It was a fairly dramatic turn of events over the prior few weeks with the probabilities of a Fed hike in March moving from about one-in-three or lower to almost guaranteed by the time we heard higher rate-focused comments from several FOMC members—something they often do strategically to help shape expectations.  Those expectations were realized this morning with a rate hike of 0.25%, bringing the new Fed funds rate to a range of 0.75-1.00%.

The formal statement acknowledged that economic activity overall has continued to expand at a moderate pace.  This is coupled with a strengthening labor market, moderately higher household spending, and increased inflation.  The committee’s economic projections, done roughly quarterly, showed little change on net in the areas of GDP growth, unemployment and inflation, although the ‘dot plot’ for upcoming expected interest rate ticked higher, on course for about three rate hikes in 2017 (as already expected).

The change in tune in recent weeks was driven by stronger economic data, firming inflation as well as a realization that several key components of the Fed’s mandate have been reached, including inflation within target and labor market strength.  The dashboard of Fed mandates shows this:

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