Chief Economist Scott Brown discusses the latest market data.
“We have production bottlenecks and supply shortages in every economic recovery,” says Raymond James Chief Economist Scott Brown, but those issues – and inflation – are expected to ease with time.
Chief Economist Scott Brown discusses current economic conditions.
The CPI rose more than expected in April, adding to inflation worries.
On Monday, the Treasury Department is expected to report a March budget deficit of about $658 billion, bringing the 12-month total to nearly $4.1 trillion, about 19% of GDP. Proponents argue that the added spending, with more to come, will help to ensure the recovery.
As the pandemic recedes and the economy reopens, we can expect strong job growth in the months ahead.
Economic data rarely follow a smooth path. Weather and external events have effects.
As expected, the Federal Open Market Committee left short-term interest rates unchanged and did not alter its monthly pace of asset purchases.
What sustained low interest rates could mean for the economy and your wallet.
In an online discussion, Fed Chair Powell repeated that the central bank is a long way from achieving its inflation and employment goals (implying no change in short-term rates or the money pace of asset purchases anytime soon).
Long-term interest rates have continued to rise. While part of the increase has been fed by inflation fears, those concerns are overdone.
The details of the January Producer Price Index showed a further surge in prices of raw materials. Breakeven inflation rates (the yield spread between inflation-adjusted Treasuries and fixed-rate Treasuries) have continued to move higher.
For a variety of reasons, many investors are worried about higher inflation. While we may see reflation (a pickup in prices that were restrained due to the pandemic), a significant increase in underlying inflation appears unlikely.
The U.S. economy lost 2.77 million jobs in the initial estimate for January, which is on par with what we saw a year ago (-2.79 million). Seasonally adjusted, this was recorded as a 49,000 gain (with private-sector payrolls up just 6,000).
With the previous week’s short-squeeze headlines behind us, investors remained optimistic about a fiscal support package, which passed the Senate by a vote of 51-50, with Vice President Harris breaking the tie.
Real GDP rose at a 4.0% annual rate in the advance estimate for 4Q20, a much more moderate pace of recovery than was seen in the third quarter. Details were mixed, but consumer spending showed a significant loss of momentum and monthly figures reflected weakness in November and December.
As expected, the new administration has hit the ground running. In his first two days in office, President Biden issued executive orders which rescinded a number of previous directives or were aimed at ending the pandemic and easing the pandemic’s economic impact.
Judging by recent phone calls and email queries, inflation is a serious concern among investors this year.
For stock market participants, weak economic data has often been taken as a positive, since that implies more fiscal stimulus. However, investors have grown more concerned about possible stumbling blocks. Democratic majorities in the House and Senate are very narrow, some lawmakers are worried about running up the debt, and the window for bipartisan agreement may be short.
The December Employment Report reflected an impact from the pandemic surge and further job losses in state and local government, but wasn’t bad otherwise.
Raymond James Chief Economist Dr. Scott Brown reflects on the trials and tribulations of 2020 and discusses his outlook for the new year.
The holiday shopping season is critical for most retailers. For some, the season is make or break for the whole year. The November retail sales report was weaker than expected, although amplified by the seasonal adjustment. No surprise, consumers are increasingly shopping online.
The news on vaccines has boosted optimism for the economy for 2021. In contrast, near-term developments have been unfavorable. COVID-19 cases have surged and in all likelihood will rise further in upcoming weeks.
The November Employment Reports was a bit disappointing. Nonfarm payrolls rose by 245,000 (vs. a median forecast of 485,000). The increase was held back by the loss of 93,000 temporary census workers.
Election results (a divided Washington) and good news on a potential vaccine boosted share prices, although there were some concerns about surging COVID-19 cases (163,402 reported on November 12) and possible difficulties in distributing the vaccine.
Recent data reports have been consistent with a further rebound in economic activity, but we still have a long way to get back to where we were before the pandemic and the pace of improvement has moderated.
The market through October continued to make the case for a steady approach to investing, especially as this is a historically volatile time – the months surrounding a U.S. presidential election – amid a historic, complicated year.
There are a number of uncertainties heading into the November 4 election and many more as we look ahead into 2021. There’s a long held belief that the stock market abhors uncertainty. There’s also an old adage that says the market often climbs a wall of worry.
By now, it should be clear that COVID-19 is not going to go away anytime soon. Consumers and businesses are getting used to living and working under the pandemic and some changes, such as the tendency to work from home, will likely be long-lasting. The economy is always evolving. However, rapid changes can be destabilizing. There will be a number of challenges in the new year.
Job losses in the early stages of the pandemic were more concentrated among low-wage workers. About half of those jobs have come back. For high-wage workers, who have been more able to work from home, job losses were less severe and have rebounded much better.
Nonfarm payrolls continued to recover in September, although the pace of improvement has slowed and we are unlikely to return to February levels until the pandemic is well behind us. The impact of COVID-19 has been uneven, with job losses remaining more severe in lower-paying service industries. Consumer spending has improved, though mixed across sectors. Further fiscal support will be critical for the unemployed.
Many factors feed into the relative strength or weakness of the U.S. economy, but the president traditionally receives the credit or blame. Fiscal policy – taxes and government spending – have an important role in economic activity, and confidence can drive consumer spending and business investment decisions.
Despite a September slump, the S&P 500 and NASDAQ wrapped up the third quarter with gains of 8.47% and 11%, respectively.
The first of three presidential debates is set for the evening of September 29. The topics, chosen by the Chris Wallace, the moderator, will be the Trump and Biden records, the Supreme Court, COVID-19, the economy, racial tensions, and election integrity.
The death of Supreme Court Justice Ruth Bader Ginsburg ignited a fight over her replacement. The increased animosity in Washington lowered the odds that lawmakers will reach agreement on a further fiscal support package and dampened investor sentiment.
The Dow Jones Industrial dipped almost 3% on Monday, and the S&P 500 slid more than 2% from the previous week, off about 7% from its recent highs earlier this month.
There were no significant surprises following the September 15-16 Federal Open Market Committee meeting. As expected, short-term interest rates were left unchanged and the FOMC did not alter its asset purchase plans.