Economic Update 6-22-2015
Since the start of the year, investors and economists have been focused on this month’s FOMC meeting; specifically, whether or not this would be ‘the one’—the meeting that announced a change in regime, from extreme emergency accommodative low rates to the start of tightening. Due to sporadic data since that time, it became more obvious over time that it was not to be.
The statement language reflected a moderate expansion of economic growth and job gains in recent months, while acknowledging the mixed nature of consumer spending, housing and business capex.
Many look at the ‘dot plot,’ which is a graph attached to the official statement showing the path of rates expected by FOMC members over the next several years—changes in these dots from last meeting are interpreted as a sentiment shift. As it stands, it appears the general expectation is a raising of rates twice by the end of 2015 (probably in the fall, as the July meeting doesn’t feature a press conference). It’s almost hard to believe, but two years hence—by end of 2017—members expect fed funds rates to be at 3% or so (given a range of +/- 0.5% in either direction).
A look at the dashboard: Continue reading
Economic Update 6-15-2015
Economic Update 6-08-2015
Below is a list of all models that are scheduled to trade today……June 8th, 2015. All revisions for these models have been posted and are ready to view.
*As a reminder, the Revision Explanation Presentation/Video will be posted later today. We will be sending out another email notifying you when it is posted. Once posted, it can be viewed via e-mail or on the LSA website.
** TRADE DATE SCHEDULED FOR TODAY…….. JUNE 8, 2015! **
A brief summary of the changes are below. There will be a more detailed explanation to follow.
If you have any questions please feel free to contact us at support@LSAportfolios.com or call us at 866-581-5724.
Chart of the Week: Putting the Rise of the Dollar in Perspective
Since its low in 2011, the US dollar is up 31%, and in the past eight months has risen at a pace faster than we have seen in forty years. The rapid rise continues to be one of the greatest concerns to the health of the world economy, some even dubbing it the cause of the next global financial crisis. However, as this chart shows, these kinds of cycles in the currency market are not uncommon. Pain will be felt in corporate profits, as international sales are lower when converted back to a strengthening dollar, but this will not have a large impact on the overall economy in the long run. As the US continues gaining strength in its recovery and international countries continue to lag behind, the increase in the dollar is a normal economic process. The rapidity of the rise is alarming, however, as growth improves in Europe and emerging markets the pace should moderate. For now, it is best to view it as more of a tailwind for international countries than a headwind for the US economy. A rising tide lifts all boats.
Economic Update 6-01-2015
LSA is excited to provide an exclusive webinar featuring the always entertaining Sam Wardwell. Sam is responsible for monitoring economic and market developments and communicating updates on financial market performance, economic trends, and the firm’s outlook and portfolio positioning to clients and their advisers. He travels nationally and internationally to meet with advisers and investors and is a sought-after speaker on the markets, the economy, and the firm’s investment strategies. Sam has spoken multiple times at the LSA National Conference and is always one of the most popular speakers at the event. To view Sam’s bio, please CLICK HERE.
Economic Update 5-26-2015
Economic Update 5-18-2015
LSA would like to offer a special thanks to renowned economist Brian Wesbury for taking the time to update us on his thoughts of his self-coined ‘plow horse’ economy. In this update, Wesbury addresses the notion that, in our current economy, the record gains in the stock market are a product of quantitative easing. He uses the chart above to refute this conventional belief.
The chart shows the growth of the monetary base and M2 designated money stock in the US. Monetary base is defined by the Fed as “the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve)1.” M2 is widely regarded as the best representation of the money supply, and is defined as M1 (the sum of currency held by the public and transaction deposits at depository institutions) plus savings deposits, small-denomination time deposits (those issued in amounts of less than $100,000), and retail money market mutual fund shares1.
It is easy to tell in this chart that the monetary base is accelerating, evidenced by the three distinct periods of rapid increase, caused by the massive bond purchases of the three stages of QE. Typically, the money the Fed spends to purchase these bonds is then used by the banking system to lend out and invest, promoting economic growth. When money is lent out in the form of cash, checking deposit or however, it is shown as an increase in the M2 money stock. In our current economy, however, M2 has not grown, meaning that banks are not using the money from the Fed’s bond purchases to lend and invest, but instead holding them as excess reserves. Therefore, Wesbury states, the Fed is not the driver of economic growth because, the dollars going into the banking system from QE is not being used to invest, but instead sitting in reserves and having no impact on growth.
If you would like to hear more insight from Wesbury, such as what he thinks is driving economic growth, his views on investing globally, and details of his one-on-one Q&A with Ben Bernanke, email us at info@lsaportfolios.com and send a request for the Brian Wesbury webinar. You can also follow his blog at http://www.ftportfolios.com/retail/blogs/Economics/index.aspx
Economic Update 5-12-2015
LSA Connect 