LSA Connect

Economic Update 5-23-2023 

• Economic data for the week included increases in retail sales and industrial production, mixed regional manufacturing and housing results, and a decline in jobless claims. 

• Global equities were higher for the week, with an absence of negative economic data, with a stronger dollar dampening foreign stocks a bit. Bonds lost ground due to rising interest rates. Commodities were led higher by stronger crude oil and natural gas prices. 

• Economic news for the week included the FOMC hiking rates by another quarter-percent, raising speculation that this might be for the final time this cycle. The employment situation report came in stronger than expected, with a falling unemployment rate, although other details were less robust. ISM services improved further into expansion, as did ISM manufacturing, although the latter remained in contraction—the mixed results reflect the uncertain prospects for recession (or not). 

• Equities were mixed, with a decline in the U.S. offset by gains in foreign emerging markets. Bonds fell back, as credit spreads widened. Commodities fell back, notably in energy, largely due to concerns about the economy. 

Economic Update 5-01-2023 

• Economic data for the week included Q1 U.S. GDP growth coming in lower than expected, gains in durable goods orders, and continued mixed results for housing markets.

• Equities rose last week as earnings came in surpassing low expectations, with the U.S. outperforming international. Bonds fared well as interest rates fell back with weaker economic data. Commodities also fell back generally for the same reasons, with crude oil prices down slightly.

Economic Update 4-26-2023 

• Economic data for the week included mixed results from several regional manufacturing surveys, while existing home sales and housing starts data deteriorated further.

• Global equities were little changed last week, with small gains in the U.S. and developed foreign markets, offset by a decline in emerging markets. Bonds fell back as interest rates rose across the yield curve. Commodities also fell back as crude oil prices reacted negatively to continued fears of lower recession-driven demand.

Economic Update 4-10-2023 

• Economic data for the week included weaker ISM manufacturing and non-manufacturing results, while the employment situation report came in just above expectations, despite some slowing under the surface.

• Equities were mixed globally, with flattish results in the U.S. and Europe seeing gains. Bonds fared well as weaker economic data pulled down treasury yields. Commodities rose upon early week news of oil production cuts, boosting prices in the energy space.

Economic Update 4-3-2023 

• Economic data for the week included a slight revision lower in U.S. GDP growth for Q4, a continued deceleration in home prices, and mixed results for consumer sentiment.

• Global equities fared positively to end the quarter, as fears of further banking contagion faded further. Government bonds declined as interest rates rose, while corporates and emerging markets rallied. Commodities gained along with stronger sentiment.

• Economic news for the week included the Federal Reserve raising rates another quarter-percent, durable goods orders falling back, mixed to slightly better housing data, and little change in jobless claims.

• Global stocks saw positive returns last week, as some banking concerns abated, along with hopes for central banks easing hawkish policies. Bonds fared positively as well. Commodities rose in price across the board with help from a weaker dollar.

The Federal Reserve Open Market Committee unanimously raised the fed funds rate today by 0.25% to a range of 4.75-5.00%. Starting from 0.00% just a year ago, this continues to be the quickest and most robust hiking cycle since the early 1980s.

The formal statement language, importantly, saw removal of the reference to “ongoing” rate increases, replaced by “will closely monitor” and “anticipates that some additional policy firming may be appropriate.” It also described the U.S. banking system as “sound and resilient,” and that credit conditions are likely to weigh on economic activity—no doubt recently added. Also, that job gains are running at a “robust” pace. Overall, this was taken as a bit dovish for a hike, and stocks turned higher immediately upon its release. In the Fed’s updated Summary of Economic Projections (SEP) or ‘dot plot’ today, fed funds rates projections were little changed, with the 2023 median level just above 5.0%, 2024 remaining around 4.0%, and 2025 down toward 3.0%—all implying normalization.

Economic Update 3-20-2023 

• Financial news was dominated by concerns over the viability of several U.S. banks, wavering between fear and relief during the week. Economic data included declines in retail sales and consumer sentiment, while housing starts gained sharply. A variety of other data, which included industrial production and regional manufacturing indexes, were mixed.

• Equities fell back globally last week, along with concerns over banking system health and economic side effects prompted investors to move away from risk. Bonds benefitted from these flows, as interest rates fell sharply. Commodities were largely also down due to rising fears of recession.

Economic Update 3-13-2023 

• Economic data for the week was largely focused on labor markets, with nonfarm payrolls and ADP employment coming in stronger than expected, while job openings declined and the unemployment rate increased. This pointed to a mixed overall message.

• Stocks fell back in both the U.S. and foreign markets due to tough central bank talk that pointed to higher interest rates, as well as volatility in financials late in the week due to a large regional bank failure. Bonds benefited from flows away from risk. Commodities declined due to lower perceived demand as recession risks remained high, in addition to warmer weather.

Economic Update 2-27-2023 

• Economic data for the holiday-shortened week included U.S. GDP data for Q4 that stayed solidly positive but with a slight downward revision, mixed to improved housing data, decent jobless claims, and stronger consumer sentiment. However, higher PCE inflation was interpreted negatively.

• Global equities lost ground last week as higher inflation readings continued to sustain assumptions for tighter central bank policy. Bonds suffered during the week as well, due to the same factors elevating interest rates. Commodities were mixed with crude oil little changed, but natural gas prices seeing some supply-driven recovery.

Economic Update 2-22-2023 

• Economic data for the week included producer and consumer prices staying elevated, although still decelerating on a year-over-year basis. Industrial production was little changed, while several regional manufacturing indexes showed divergent results. Housing data was also mixed.    

• Equities ended in varied directions last week, with flattish U.S. returns, while Europe gained, and Asia fell back. Bonds also lost ground with interest rates moving higher along with persistent inflation concerns. Commodities fell across the board, along weaker energy prices and a stronger dollar.