LSA Connect

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.

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.