The Federal Open Market Committee will meet this week to set monetary policy. It’s widely expected that the FOMC will lower the federal funds target range by another 25 basis points, although that’s not a done deal.
Nonfarm payrolls rose by 130,000 in the initial estimate for August, less than expected and despite a 25,000 boost from census hiring. For production workers, average hourly earnings advanced by 0.5% (+3.5% y/y). Monthly wage and payroll figures can be choppy, but the underlying trend in job growth is lower.
The ISM surveys for August were mixed and the employment report disappointed, but investors were encouraged by prospects for U.S./China trade talks, which are set to resume at a high level in early October.
Market volatility remains elevated, reflecting trade tensions and continued concern around the yield curve.
Recent economic data reports have continued to paint a mixed picture of the U.S. economy, with strength in consumer spending and a mild recession in manufacturing. On top of this, investors remain concerned about several issues, including global growth, geopolitical uncertainties, trade policy, and an inverted yield curve.
The minutes of the July 30-31 Federal Open Market Committee (when the Fed lowered short-term interest rates by 25 basis points) showed that officials were split. “A couple” preferred a 50 basis point cut, while “several” favored no change.
Read the latest Weekly Headings by CIO Larry Adam.
In his speech at the Kansas City Fed’s annual monetary policy symposium in Jackson Hole, Fed Chair Powell discussed the challenge of keeping the U.S. economy “in a favorable space” in the face of significant risks.
The spread between the 10-year Treasury note yield and the 2-year yield briefly dipped below 0. An inverted yield curve signals a strong likelihood of entering a recession within the next 12 months, but the odds of a recession had already been rising as the yield curve has flattened.
A 2-year/10-year Treasury inversion has left markets shaken – but don't let short-term volatility get the better of your long-term financial focus.
On August 5, China allowed its currency, the yuan, to depreciate against the U.S. dollar. It wasn’t a particularly large move, a little more than 1.5%, but it breached 7 yuan per $ -- a level seen as “psychologically important.”
Readers should be aware that tariffs are a misguided way to deal with bilateral trade deficits and misbehavior on the part of certain trading partners. Tariffs are a tax on U.S. consumers and businesses. Tariffs raise costs, invite retaliation, disrupt supply chains, and dampen business fixed investment.
Real (inflation-adjusted) GDP growth rose at a 2.1% annual rate in the advance estimate for 2Q19, a bit better than the median forecast (+1.8%), but growth was concentrated in just two components, consumer spending and government. Everything else was down.
With the future of technology remaining bright and necessary for the U.S. to remain the dominant global superpower, we continue to view technology as one of our favorite equity sectors.
Retail sales results for June were stronger than expected, consistent with a pickup in consumer spending growth in 2Q19 (although that follows a weak 1Q19). Industrial production was flat, but manufacturing output picked up a bit in June (still in an overall downtrend in 2019).
We often talk about how difficult predicting can be, even for the financial industry experts. Today’s markets have many influencing variables from the traditional economic releases and transforming population dynamics to the more recent global influences. Perhaps one of the greatest modern day market influences are the world’s central banks.
Nonfarm payrolls rose more than expected in the initial estimate for June. The news sent equity futures lower, bond yields higher, and reduced the odds of more aggressive Fed policy action later this month.
All right, one more time. Tariffs raise costs for U.S. consumers and business, disrupt supply chains, invite retaliation, and undermine business fixed investment.
Like Batman, investors cannot resort to superhuman powers when investing. Instead, knowledge, analytical skills and ingenuity are paramount for success. Asset allocation, diversification and risk management are essential dynamics to consider as volatility moves higher.
Senior Fed officials were divided on whether it will be appropriate to lower short-term interest rates by the end of the year, although even those expecting no change felt that the case for easier policy had strengthened.
While the federal funds futures market is pricing in some chance (about 24%) of a rate cut this week, the Federal Open Market Committee is widely expected to leave rates steady.
The sharp increase in geopolitical risk, potential action by OPEC to boost crude oil prices (through further supply cuts), and our view that concerns surrounding global growth are overdone support our year-end WTI forecast of $70/bbl.
The May job market report disappointed, but it was hardly a disaster. Nonfarm payrolls were reported to have risen by 75,000 in the initial estimate, following a 224,000 gain in April.
The “inconvenient truth” of equity market pullbacks is that investors tend to want them in order to invest at more favorable prices, but when they actually occur, investors get nervous, question their conviction and postpone their purchases.
After my father, a Pearl Harbor survivor, died in 2011, we found a shoebox. It contained items that belonged to my Uncle Bill (my mother’s brother), who had also served in WWII. There was Bill’s birth certificate and baptism record, an address book, and some pages that looked like they were torn out of a diary.
The partial government shutdown, poor weather, and the late Easter appeared to dampen the underlying pace of growth in the first quarter. However, April data on retail sales, industrial production, and durable goods orders suggest the softness will be longer lasting.
Memorial Day is also the “unofficial” start to summer as the temperature heats up, school ends, and vacation season begins. With more people on vacation there is a tendency for investors to lose focus on the financial markets. However, this particular summer presents numerous events, deadlines, and potential headlines that we believe investors cannot ignore as they could lead to increased volatility, both to the upside and downside.
Tariffs have had a negative impact on the U.S. economy, but a relatively limited one to date. Pain is obviously felt more in some areas than others, but the cumulative impact is growing and a continued escalation in trade tensions would further dampen growth.
As the Friday early morning deadline (12:01 AM EST) expired, tariffs on an additional $200 billion of Chinese imports have technically gone into effect. However, as we go to press, negotiations are ongoing with the hope that a compromise can be brokered.
Equities remain near all-time highs, as the S&P 500 closed at a record high two times this week and is now up 17.1% year-to-date, the best start to a year on a price return basis since 1987.
The April Employment Report was not as strong as it seems, but still consistent with moderate growth in the overall economy, tighter job market conditions, and moderate wage growth. Wage growth is likely being offset by faster productivity growth (although results will vary by firm and industry), restraining inflation pressures from the labor market.
On the back of 1Q19 solid earnings results and healthy economic data releases, the S&P 500 continued its remarkable move higher this week and closed at a record high (2,933) for the first time since September 2018.
The advance GDP report was a mixed bag. The headline figure was stronger than expected, but boosted by faster inventory growth and a narrower trade deficit, both of which are likely to reverse in the second quarter. Consumer spending and business fixed investment slowed, while residential fixed investment fell for the fifth consecutive quarter.
The advance estimate of 1Q19 GDP growth will arrive on Friday (April 26). There’s always a lot of uncertainty in the advance figure (we’re missing a number of components) and that is especially so this time.
Emerging markets, particularly in Asia, remain one of our favored regions for several reasons including...
Tax receipts were up 0.7% in the first six months of FY19. Individual tax receipts were down 1.7%. Corporate tax revenues fell 13.5%. Payrolls taxes rose 4.7%.
Clearly I have been “sitting here in limbo” for the last few weeks relaxing in Key West, which is a profoundly different planet. I love it! We stayed at Casa Marina, a resort I would highly recommend to anyone. So while I was limbo, it would seem as though the stock market was in limbo, as well.
Nonfarm payrolls rose a bit more than expected in the initial estimate for March. While the monthly data are subject to statistical noise and seasonal adjustment difficulties, the underlying trend in job growth is likely moderating. That shouldn’t be a surprise.
As anticipated, the estimate of fourth quarter GDP growth was revised lower (to 2.2%, vs. +2.6% in the “initial” estimate). All major components grew a bit less than in the previous estimate. Recent figures have generally been consistent with a lackluster pace of growth in 1Q19.
“Ark Invest” is a money management firm that manages money in ETFs, mutual funds, and separately managed accounts. Ark believes that innovation is the key to growth and alpha.
Last Friday I spoke to a number of money managers. One of the attendees was Linda Bradford Raschke, a professional trader, who used to trade on the Pacific and Philadelphia Stock Exchanges, founded a number of hedge funds, well you get the idea.
As expected, the Federal Open Market Committee left short-term interest rates unchanged and provided some details on the unwinding of the balance sheet. The revised dot plot showed that a majority of senior Fed officials expect no change in rates in 2019 (but a majority also anticipate one or more hikes in 2020).
A long time ago in a galaxy far far away I began working on Wall Street. The year was 1971 and I had joined a small firm making markets in over-the-counter stocks and options. My salary was $100 a week and it was Camelot.
Nonfarm payrolls rose by a disappointing 20,000 in the initial estimate for February, following a strong 311,000 gain in January. However, it appears that mild weather helped to boost the January figure and depressed the February data.