LSA Connect

Economic Update 7-24-2023 

• Economic data for the week included the index of leading economic indicators continuing a long stretch of declines, pointing to ongoing recession risks. Industrial production and retail sales slowed, as did sales and starts in the housing sector. 

• U.S. stocks saw gains last week, coupled with mixed results abroad. Bonds were little changed in the U.S. with a stable yield curve, while foreign bonds suffered from a weaker dollar. Commodities were also mixed, with gains in energy offset by weaker prices for industrial metals. 

U.S. stocks were mixed last week, with continued positive sentiment from the prior week’s better inflation readings and optimism about potential avoidance of a recession—seen by improved outlooks from some prominent economists. However, in earnings season, results are often stock-specific. Growth sectors ended in the negative, in contrast to recent strength, while value names gained over 2%. Small cap stocks outperformed large caps, to make up some of their lost ground in 2023, with some investors acknowledging their multi-year valuation discounts relative to larger companies. By sector, gains were had in energy and financials (for example, better than expected earnings for some firms, and Charles Schwab losing deposits at a slower rate than feared) as well as more defensive sectors health care and utilities. On the negative side, communications (Alphabet/Google) and consumer discretionary (Amazon and Tesla) each fell -2% to -3%. The reconfiguring of the Nasdaq 100 today (along with its popular tracking funds like the QQQ) will serve to trim weightings from the largest seven firms, while boosting the relative sizes of the rest, which may have also influenced some pre-emptive trading. 

Economic Update 7-18-2023 

• Economic data for the week included producer and consumer price inflation continuing to decelerate—and even more so than expectations. Consumer sentiment also improved to the highest point in several years. 

• Global equities gained last week on the back of the improving U.S. inflation data. Bonds also gained along with the retreat in interest rates. Commodities rose with help from a weaker dollar. 

In the midst of slower summer volume, U.S. stocks gained last week, as falling consumer and producer inflation boosted investor spirits. The key factor, of course, is the impact on the economy, as well as the lower probability of the Fed’s continued hawkish rate hike path. Every sector ended in the positive last week, with communications and consumer discretionary leading the way, and energy and consumer staples coming up in the rear, with lesser gains. Real estate fared positively, up nearly 3%, as interest rates fell back. Earnings season began Friday, with several large banks showing mixed results for the quarter. 

Economic Update 7-10-2023 

• In a holiday-shortened week, economic releases included the mixed results of ISM manufacturing falling further into contraction, while ISM services rose further into expansion. The employment situation report showed positive jobs growth, but at a slower rate than expected, to cap a week of mixed labor data generally. 

• Equities fell globally last week, with expectations for more hawkish central bank policy and associated higher interest rates for longer, following not-terrible economic data. Bonds fell back along with higher assumed rates. Commodities were up slightly, led by production cuts in crude oil that boosted prices. 

Economic Update 6-20-2023 

• Economic news for the week included the Federal Reserve keeping interest rates steady for the first time in a year. In other data, consumer price inflation decelerated but remained high, while producer price inflation decelerated even further. Retail sales rose, while industrial production fell back, and several regional manufacturing indexes were mixed.  

• Global equities saw strong returns last week, in keeping with the Fed pause, lower inflation, and an absence of otherwise poor economic news. Bonds were little changed, along with a quiet yield curve, with corporates and foreign outperforming. Commodities fared positively, with gains in agriculture and natural gas. 

Economic Update 6-12-2023 

• In a light week for economic data, ISM non-manufacturing fell back but continued on a path of expansion. Jobless claims were mixed, with possible continued effects from seasonal adjustments. 

• Equities gained across the board last week, as sentiment continued in a positive direction. Investment-grade bonds fell back, as yields ticked higher, with foreign bonds seeing gains from a weaker dollar. Commodities were mixed, with crude oil falling back, as production cuts were offset by economic growth concerns. 

U.S. stocks earned minor gains last week, with little economic news but enthusiasm over the potential benefits of AI as well as an expected pause by the Fed next week seemingly leading the mildly positive sentiment. By sector, stocks were dominated by gains in consumer discretionary (due to Tesla), utilities, energy, and industrials; laggards included negative returns for technology and consumer staples. In tech, there was some interest in the eagerly anticipated Apple mixed reality headset (with a price tag of up to $3,500). Then again, as with AI, the near-term economic growth benefits don’t seem obvious, and price reaction was neutral on net. 

Economic Update 6-05-2023 

• Economic data for the holiday-shortened week included strength in the May employment situation report and construction spending, while ISM manufacturing and consumer confidence declined. 

• Global stocks broadly rose last week, helped by the conclusion to the U.S. debt ceiling negotiations and strong labor data. Bonds fared well as interest rates ticked downward. Commodities were mixed, with energy again falling back. 

Economic Update 5-30-2023 

• Economic data for the week included a revision higher for Q1 GDP, as well as reported gains in personal income, personal spending, and durable goods. New home sales also saw an increase, while jobless claims reset from recent unusual filing activity. 

• Global equity markets featured gains in the U.S., offset by declines in developed foreign markets. Bonds fell back as persistent inflation raised odds of another Fed rate hike. Commodities were mixed, with demand and supply conditions in energy seemingly in balance. 

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.