LSA Connect

Economic Update 10-11-2021

• Economic data for the week included improvement in ISM non-manufacturing sentiment, ADP private employment, and jobless claims. However, the employment situation report for September came in short of expectations.

• U.S. equity markets gained last week, in contrast to a negative September, while foreign regions ended mixed. Bonds lost ground globally as interest rates rose, in keeping with persistent inflation concerns. Commodities gained several percent, as crude oil prices reached a multi-year high upon strong demand and lack of available supply.

Economic Update 9-27-2021

• Economic data for the week included no action by the Federal Reserve regarding interest rates (although they gave strong signals about upcoming tapering). Otherwise, existing home sales fell, new home sales and housing starts rose, while jobless claims were mixed.

• U.S. equity markets rebounded from a volatile start to the week to gains, while foreign equities ended mixed. Bonds lost ground across the board as investors interpreted a somewhat optimistic Fed into higher interest rates. Commodities rose across the board, led by a sharp supply-driven rise in the price of crude oil.

Economic Update 9-13-2021

• On a holiday-shortened and light week for economic releases, data included improvement in job openings and jobless claims, as well as higher producer price inflation.

• Global equity markets fell back throughout the course of the week, as continued Covid cases and rising prices have raised fears about the durability of the recent growth stretch. Bonds were little changed in the U.S., while foreign debt was negatively impacted by a stronger dollar. Commodities were mixed, with gains in industrial metals and energy offset by declines elsewhere.

Economic Update 9-07-2021

• Economic data for the week included stronger results in the manufacturing and construction segments, while services sentiment and the monthly employment situation report came in weaker than expected. Home prices also continued to increase at historically impressive rates.

• Global equity markets gained last week, with economic data coming in as expected for the most part and little late summer news. Bonds were similarly flat in the U.S., with little trading volume, although foreign issues fared better due to a weaker dollar. Commodities ticked higher, particularly natural gas, due to recent disruptive storm activity.

Economic Update 8-30-2021

• Economic data for the week included some improvement in prior-quarter GDP, continued gains in personal income and spending, decent home sales figures, while durable goods and consumer sentiment were little changed.
• Global equity markets gained last week, as formal Pfizer vaccine approval appeared to raise hopes for continued improvement in world vaccination rates. Bonds were little changed in the U.S., but fared well abroad from a weaker U.S. dollar. Commodities gained due to the same currency effect and jump in crude oil prices, along with the Afghanistan terror attack and impending Gulf Coast hurricane.

Economic Update 8-23-2021

• Economic data for the week included weakness in retail sales, housing, as well as regional manufacturing sentiment. On the other hand, industrial production and jobless claims improved.

• Global equity markets suffered net declines last week, as the headwinds of the Covid delta variant, potentially peaking growth, and higher potential for a Federal Reserve ‘taper’, all weighed on investor sentiment. Bonds fared decently as flows moved away from risk assets, driving down rates. Commodities suffered sharp declines, as the above-noted factors were assumed to threaten economic activity and goods demand.

Economic Update 8-16-2021

• Economic data for the week included continued high readings for import and producer prices; consumer price inflation remained elevated as well, although showing signs of deceleration. Other data pointed to stronger job openings and a continued reduction in jobless claims.
• Global developed equity markets ended the week with gains generally, while emerging market and U.S. small cap lost ground. Bonds eked out small gains as interest rates again ticked down across the yield curve. Commodities earned marginally positive returns, with crude oil prices little changed for the week on net.

Economic Update 8-09-2021

• Economic data for the week included a slight drop in manufacturing, offset by continued strength in services. The July employment situation report came in stronger than expected, on both job creation and a lower unemployment rate.

• Global equity markets saw gains across the board, although emerging markets were held back a bit by China. Bonds fell back as interest rates moved higher. Commodities fell back, largely due to a sharp correction in crude oil prices based on demand fears.

The Federal Reserve Open Market Committee made no changes in monetary policy today, keeping rates near the zero target of 0.00-0.25%. This was as expected.

The formal statement language was minimally changed. The only adjustments noted labor continuing to strengthen, but have not fully recovered; additionally, economic growth continuing to depend on the path of Covid (which has worsened in recent weeks). The most closely-watched word, ‘transitory’ (referring to current inflation drivers), was kept intact. Overall, it provided minimal new information. The Fed is establishing two permanent repo facilities, one domestic and one for international transactions. These facilities represent continued non-emergency avenues for providing liquidity to short-term funding markets as needed, rather than being started and stopped, which contain their own market signaling problems. The concept of this had been discussed in prior meetings.

Market analysis has moved to the question of when the Fed will begin (or simply begin discussing) the ‘tapering’ off of their monthly treasury and agency mortgage-backed bond purchases. Current odds seem to point to year-end, although recently higher inflation readings may have sped up the timeline by a few months.

The Fed’s evaluation metrics remain mixed, but point to an economy that is recovering from the worst of 2020:

Economic Update 7-26-2021

• Economic data for the week included gains in existing home sales and housing starts, along with continued rising prices and tight inventory. Jobless claims were mixed, with seasonal effects affecting near-term claims, while continuing claims showed ongoing improvement.

• U.S. equity markets rebounded into positive territory last week after a sharp Monday downturn, fueled by fears around the Covid Delta variant. Foreign stocks in developed markets gained to a lesser degree, while emerging markets lost ground. Domestic bond prices ticked slightly higher as yields and credit spreads continued to decline. Commodities were mixed, despite some early week demand concerns for crude oil, which later recovered.

Economic Update 7-19-2021

• Economic data for the week included strong consumer and producer inflation readings, as well as improvements in retail sales and industrial production. Jobless claims also continued to fall, while consumer confidence waned a bit.

• Stocks were mixed globally last week—the U.S. and developed foreign markets lost ground, while emerging markets gained. Bonds fared positively as yields on the treasury curve continued to fall. Commodities were mixed, with crude oil prices pulling back by a few percent, partially offset by ag prices.

Economic Update 7-12-2021

• During an abbreviated week, economic data included a decline in services sentiment, although the measure remained quite strong. Job openings improved, while jobless claims were mixed—as initial claims rose but continuing claims sustained their decline.

• U.S. equity markets gained slightly last week, outperforming foreign—especially emerging markets which fell back sharply. Bonds in the U.S. and developed markets gained as interest rates continued to fall, surprisingly many investors. Commodities lost ground last week, largely led by declines in the grain complex.