Weekly Economic Update

Economic Update 11-12-2018

 

  • Economic news for the week included a FOMC meeting where interest rates were held steady, manufacturing ISM declined but remained strongly positive, and jobless claims continued to show labor market strength.
  • U.S. equity markets gained some ground last week, following the conclusion of the mid-term elections, while foreign stocks were mixed to lower on net.  Bonds were positive as interest rates declined a bit following the Fed’s meeting.  Commodities fell a few percent driven primarily by lows in crude oil, which is now in a bear market.

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Fed Update

Fed Note:

As expected, the FOMC unanimously made no change in the fed funds target rate during the November meeting—leaving the level at 2.00-2.25%.  Their formal statement offered few surprises, noting strength in underlying economic growth and labor markets.

In keeping with the quarterly pace of rate movements, fed funds futures peg the chances of a hike in December at over 80%.  Many economists also expect 2-4 hikes during 2019, but this gets murkier, with risks to that base case including an intensification of trade tensions, which could cause some erosion to GDP growth and also raise inflation, as well as a later-cycle flattening in manufacturing and other areas.  The Fed is no doubt cognizant (per their mentioning it) of the negative signals that a flat or inverted yield curve would send, but don’t claim to be overly concerned about this coming to pass.

The Fed dashboard remains little changed from the last meeting:
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Weekly Economic Update

Economic Update 11-05-2018

  • Economic data for the week was highlighted by a decent government employment report, as well as strong results from other labor measures, and stronger consumer confidence, yet weaker manufacturing data.
  • Equity markets in both the U.S. and abroad bounced back last week, gaining several percent.  On the other hand, fixed income markets ended the week negatively due to flows back toward risk and rising interest rates.  Commodities lost several percent solely due to the higher crude oil supplies, which drove prices down sharply.

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Weekly Economic Update

Economic Update 10-29-2018

  • Economic data for the week was highlighted by GDP results for the third quarter that came a bit better than expected, strong durable goods orders and jobless claims, as well as mixed housing and sentiment results.
  • Global equity markets fell sharply again, coupled with higher levels of volatility.  Bonds fared well, as investors sought out safety, causing interest rates to decline.  Commodities declined as well, due to weaker energy prices.

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Weekly Economic Update

Economic Update 10-22-2018

  • Economic data for the week was highlighted by mixed but still-strong results from manufacturing, continued growth-oriented results from a key index of leading economic indicators, weaker retail sales affected by storm activity, and poor housing market results.
  • Developed equity markets were flattish in the U.S. due to a variety of positive and negative cross-currents, while emerging markets lost ground.  Bonds also declined as interest rates rose.  Commodities generally declined along with the price of crude oil.

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Weekly Economic Update

Economic Update 10-15-2018

  • Economic data for the week featured more tempered inflation results than expected as seen in last month’s PPI and CPI, lowering the trailing year’s results.  Consumer sentiment declined and jobless claims ticked upward a bit due to hurricane-related effects.
  • Global equity markets suffered a volatile week, with the worst down day stretch seen in over six months.  Bonds fared positively, due to cash flows moving to less risky assets.  Commodities were mixed to down, as the price of crude oil declined sharply.

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Market Pullbacks

Market Pullbacks

It’s easy to get caught up in complacency when conditions are good, the sun is shining and the market is rising without interruption.  But, as we know intuitively (but often still forget), such parabolic conditions aren’t realistic or even desirable.  In theory, markets that moved upward without any risk of an occasional downward slide would eventually become prohibitively expensive as discounts would be wrung out of the system and create a market situation far more fragile than one with a healthy balance that reacts, digests/disregards and interprets news as it occurs.  Good or bad, this is the essence of how markets have operated over the course of the last few centuries. Continue reading

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Weekly Economic Update

Economic Update 10-08-2018

  • Economic data for the week was highlighted by a weather-suppressed but otherwise decent employment report, strong results from other labor metrics such as private employment and claims, and mixed manufacturing results.
  • Equity markets in both the U.S. and overseas experienced a negative week as interest rates ticked sharply higher.  As expected, fixed income was similarly affected across the board.  Commodities, however, ticked higher due to stronger agricultural and energy prices.

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Weekly Economic Update

Economic Update 10-01-2018

  • Economic data for the week was highlighted by the Federal Reserve raising rates by a quarter-percent as expected, final GDP data for the second quarter coming in unchanged yet strong, mixed results for housing, and decelerating but also strong industrial data.
  • Global equity markets lost ground for the week, with the U.S. outperforming foreign regions generally.  Bonds were little changed in keeping with a flattish yield curve, despite the Fed raising rates.  Commodities gained several percent due to the continued momentum of rising crude oil prices.

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Fed Note

Fed Note:

The FOMC decided to raise short-term interest rates by another quarter-percent—the third hike this year—bringing the fed funds target range to 2.00-2.25%.  This was largely as expected, with formal probabilities of such a move being pegged at around 95% based on futures markets.  There were no dissents.

The official statement noted a continued strengthening in economic and labor market activity, in addition to growth both household spending and business fixed investment.  Inflation was described as ‘near target’.  However, the term ‘accommodative’ was removed, in an acknowledgment of the evolution in policy.  The probability of a fourth hike in December by another quarter percent stands at about 75%, while 2019 probabilities are a bit less robust, with an anticipated 2-3 hikes.  However, that’s a lifetime away in the world of data-dependent Fed watching.  Based on assessments of current conditions most closely tracked by the Fed as part of its dual mandate, all are showing a green light:

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Weekly Economic Update

Economic Update 9-24-2018

  • Economic data last week showed continued signs of expansion, seen by a continued upward trend in an index of broad leading economic indicators, as well as stronger manufacturing and job markets; however, housing data continued mixed.
  • U.S. equity markets rose to hit new highs, but were surpassed by foreign stocks, helped by a weaker dollar.  Domestic bonds lost ground with higher interest rates, while emerging market debt fared better.  Commodities gained with currency impacts and higher oil and metals prices.

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Weekly Economic Update

Economic Update 9-17-2018

  • Economic news for the month included mediocre retail sales numbers, several inflation results that came in a bit lower than expected and continued strong labor market data.
  • Equity markets gained globally, as sentiment about trade improved somewhat.  Bonds were mixed with interest rates moving higher, as credit outperformed governments.  Commodities gained slightly, as oil prices moved higher.

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