Fed Update

Posted on April 30, 2015 by LSAConnect

Fed Note:

The FOMC meeting ended with little fanfare as theories continued to swirl about surrounding the timing of the Fed’s choice to raise interest rates.  Will it be June or will it be September?  Or, will it be later?  The Fed didn’t provide a lot of hints other than anecdotal comments here and there that conditions remain ‘data-dependent,’ which is about as good of a crystal ball as we can get.

Today’s statement described a general slowing during the winter, coupled with a moderation in job gains, and a decline in household spending.  Also, that business fixed investment softened, housing remained slow and exports declined.  However, the tone remained generally optimistic, even if the language was little changed toward the positive—implying the Fed feels the weakness is transitory.

Our look at a few of the factors underlying the Fed’s various mandates:

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Chart of the Week: Benefits of Bank Loans in a Portfolio

Posted on April 29, 2015 by LSAConnect

Chart of the Week: Benefits of Bank Loans in a Portfolio

Duration, Yield

Despite almost $36 billion exiting the loan market and negative net fund flows for the past 11 months, Lord Abbett believes that bank loans still have features that make them attractive within a portfolio. Continue reading →

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Weekly Economic Update

Posted on April 28, 2015 by LSAConnect

Economic Update 4-27-2015

  • In a light week for economic releases, durable goods came in somewhat better than expected, led by aircraft orders, while housing also showed some mixed signs of life.  Housing has been sporadic over the last few years, which has concerned economists, although the spring season will no doubt bring more information and clarity.
  • Equity markets worldwide gained on the week, with earnings coming in a bit better than expected.  Interest rates also rose, which ended up being a negative for government bonds; corporate and emerging market debt fared better.  Commodities rose with help from a weaker dollar and higher oil prices.

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Weekly Economic Update

Posted on April 21, 2015 by LSAConnect

Economic Update 4-20-2015

  • Economic results on the week were in keeping with the recent lackluster trend, with weaker-than-expected retail sales and manufacturing.  Inflation came in a bit stronger, but remains flat to slightly negative on a year-over-year basis when energy price declines are considered.
  • Equity markets lost ground last week upon a variety of factors later in the week, not helped by challenging economic data.  Bonds rose on lower interest rates, while commodities generally were aided by a weaker dollar and rising oil prices.

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Weekly Economic Update

Posted on April 13, 2015 by LSAConnect

Economic Update 4-13-2015

  • Economic data was light and results mixed last week with the ISM services report coming in a bit weaker, but jobs reports—JOLTs and claims—better than consensus.  The FOMC minutes generally read as expected, with differing views on the strength of the economy and timing of potential rate hikes.
  • Equity markets gained on the week, led by emerging markets.  Government bonds lost ground upon higher rates, although corporates fared better.  Commodities generally gained—led by energy—even in spite of a stronger dollar.

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Brian Wesbury ‘The Triple Mandate’

Posted on April 13, 2015 by LSAConnect

Listen to Brian Wesbury, Chief Economist at First Trust Portfolios, discuss a third mandate of today’s Fed that goes one step beyond maximum employment and price stability and why he believes we are still destined for a rate hike in June. This 6 minute video is worth a listen and can be found by clicking the following link: Wesbury 101- The Triple Mandate

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Chart of the Week: Is Job Creation Holding Back Rate Hike?

Posted on April 9, 2015 by LSAConnect

Chart of the Week

nonfarm payroll

Last Friday, the nonfarm payrolls numbers, a closely watched gauge regarding the employment market, for the month of March were announced at a disappointing 126,000 new jobs, a far cry from the 245,000 economists estimated. This was, no doubt, a big miss, and is being seen by many as just another indication the Fed will not raise rates this year. However, when put in context, these claims seem overblown. With the unusually cold weather, west coast port strikes, and steep drop in energy prices, the employment market was bound to take a hit. Despite these issues and the poor March number, payrolls are up 261,000 on average the past 6 months, the exact same as the previous 6 months. This number is volatile in nature, having a standard deviation of around 70,000, meaning that 1 in 20 reports will be around 140,000 off the mark. Basically, this latest report is something to look out for, but for now should not be seen as anything more than normal volatility.

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Weekly Economic Update

Posted on April 6, 2015 by LSAConnect

Economic Update 4-06-2015

  • Despite being a shortened holiday week, it was busy due to a number of economic data releases.  Good news came from upside surprises in factory orders, firmer housing data and a better consumer confidence reading; bad news came from weaker job reports and disappointing manufacturing survey results.
  • U.S. equity markets pulled back on the last day of the first quarter as profit-taking and quarter-end window-dressing activities took place.  Emerging market stocks outperformed both U.S. and EAFE stocks.   Bonds performed similar to stocks as weaker economic data supported yield trending down.  REITs were flat and commodities lost ground.

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Ben Bernanke Launches Blog

Posted on March 31, 2015 by LSAConnect

ben

In the midst of all the uncertainty of Fed policy, former Federal Reserve Chairman Ben Bernanke made the following announcement:

“Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers. I look forward to doing that—periodically, when the spirit moves me—in this blog. I hope to educate, and I hope to learn something as well.”

Insights from this blog on Fed policy are likely to be relevant for advisers, and can be found through the following link:

http://www.brookings.edu/blogs/ben-bernanke​ 

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Weekly Economic Update

Posted on March 31, 2015 by LSAConnect

Economic Update 3-30-2015

  • Last week’s economic data was relatively lackluster, with sporadic results from durable goods, while housing came in similarly to slightly better than expected. Inflation remained slightly negative on a headline basis and below-average on a core level.
  • Equity markets generally lost ground on the week, with developed foreign indexes faring better than domestic. Bond prices and yields were generally flat on the week with minimal significant news spurring action in either direction.  Commodities gained a bit on a weaker dollar and higher oil prices.

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Weekly Economic Update

Posted on March 23, 2015 by LSAConnect

Economic Update 3-23-2015

  • In a somewhat light week for economic reports, the FOMC meeting was the highlight—in which no action occurred, other than a subtle language change that stemmed the persistent rise in the dollar. Several housing reports showed lackluster results, but these could have been largely affected by extreme weather in the Eastern part of the country, artificially depressing activity.
  • Equity markets turned positive upon the Fed’s tempered language and references to moderation in economic growth (which could postpone a rate increase—pleasing to markets). Bond rates also fell back sharply on the news, which was positive for bond prices.  The weaker dollar served as welcome news for commodity prices.

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Chart of the Week: Fed Not Impatient

Posted on March 19, 2015 by LSAConnect

Chart of the Week

screen shot 2014-12-17 at 2.04.43 pm

From December 2014 statement

dot plot march 18 2015

From yesterday’s statement

This week’s charts are Dot Plots, a visual depiction of the expectations FOMC meeting participants hold of where the federal funds rate should be in different points in the future. The dropping of the term ‘patient’ received most of the publicity in release of the FOMC Meeting minutes yesterday, giving the false sense of a hawkish theme. The actual statements from the Fed conflictingly painted a dovish tone. There were clear concerns with the rising dollar causing headwinds for growth, and the Fed downgraded their expected economic output from 2.6-3.0 percent to 2.3-2.7 percent accordingly. Incidentally, participants of the meeting lowered their expectations of where the federal funds rate should be by the end of 2015. The median expectation dot is at 0.625 percent, down from 1.125 percent in the December statement, suggesting that rate rises are more likely to be announced later (in the September meeting) rather than sooner (June meeting).

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