Economic Insights

A brief monthly update on what's happening in the municipal bond market.

The Federal Reserve was already holding short-term interest rates near zero. What today's meeting made clear was how determined the Fed is to hold them there for at least the next few years and perhaps well into the current decade.

This morning's seasonally adjusted 860K new claims, down 33K from the previous week's revised figure, was worse than the Investing.com forecast of 850K.

The latest Manufacturing Index came in at 15, down 2.2 from last month's 17.2. The 3-month moving average came in at 18.8, down from 21.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 56.6, up 17.8 from the previous month's 38.8.

The facilities will bring products closer to customers, making shopping online about as fast as a quick run to the store.

What did happen in the early ‘70s to cause such a large and enduring structural shift in the U.S. economy?

It’s probably a good time to invest in commodities now when prices are lower, according to former Goldman CEO Lloyd Blankfein.

Two of the paramount risks facing advisors and their clients are from inflation and volatility. Inflation will erode the purchasing power of portfolios and volatility almost always accompanies steep declines in asset values. My guest today, Nancy Davis, has an innovative product that seeks to hedge relative interest rate movements, mitigate inflation risk, profit from an increase in volatility and a steepening of the yield curve, and provide inflation-protected income.

Markets have been walking a fine line, with a still-struggling economy on one side and hopes for a COVID-19 vaccine breakthrough on the other. Heading into the fourth quarter, there are both encouraging signs and cause for caution.

The coronavirus shock is accelerating structural trends in inequality, globalization, macro policy and sustainability. This is fundamentally reshaping the investment landscape and will be key to investor outcomes.

Month-over-month nominal sales in August increased by 0.56%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.18%.

Adding intangible assets to book value provides a more robust measure of firm capital. But, just as a home buyer considers a host of variables when evaluating the price of a new house, we prefer to use multiple metrics, not book value alone, to get the most complete picture possible of a firm’s valuation.

Ed Perks and Gene Podkaminer of Franklin Templeton’s Multi-Asset Solutions team discuss the attractions of alternative assets that can offer natural portfolio diversification. Over a longer-term horizon, they continue to believe global stocks have greater performance potential than global bonds, or alternatives, but this outlook will not be reached along a smooth path.

The December deadline for a Brexit deal is quickly approaching. One consequence of Brexit was that firms couldn’t plan—or they were forced to plan for a no-deal scenario. It’s a big reason why the pace of business investment was so sluggish in the years since the 2016 referendum...

Here are five biases that may be lurking in your subconscious and influencing the way you assess men and women.

Markets may press even higher this year, but some areas may fall behind.

In recent years, global equities had slightly outpaced market forecasts for lower equity returns. Then the COVID-19 pandemic hit the global economy, putting an end to the 10-year bull market. Equity markets have now started to recover, but the pandemic introduced and exacerbated challenges that we expect to subdue financial market returns over the next five years.

Another market high, with expectations for a “V”accine-shaped recovery.

Today's report on Industrial Production for August shows a 0.36% increase month-over-month, which was below the Investing.com consensus of 1.0%. The year-over-year change is -7.73%, up from last month's YoY decrease.

Overall, EM IG bonds represent a great opportunity for investors seeking to monetise the EM risk premium with moderate volatility in a world, where higher yielding IG-rated securities are increasingly difficult to come by.

This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 17.0 was an increase of 13.3 from the previous month's 3.7. The Investing.com forecast was for a reading of 6.0.

The price of Regular and Premium are down three and two cents, respectively, from last week. According to GasBuddy.com, California has the highest average price for Regular at $3.21 and Mississippi has the cheapest at $1.83. The WTIC end of day spot price closed at 37.26, up 1.4% from last week.

The yield on the 10-year note ended September 14, 2020, at 0.68%, the 2-year note ended at 0.14%, and the 30-year at 1.42%.

Breakout inflation is not our top concern. Europe explores support for national champions, and the U.S. unemployment rate masks some fragility.

Chief Economist Scott Brown discusses current economic conditions.

A wave of policy support to stabilize the world economy has left developed nations with a growing public debt load. What path will governments follow to address the issue? History offers several debt-reduction templates.

In a challenging year dominated by the COVID-19 pandemic, the municipal market is recovering on the strength of unprecedented federal support.

As we near the end of the third quarter, key economic reports will be released that will influence our forecast for third quarter real Gross Domestic Product. It will be a very strong quarter.

The third generation of financial planning mathematical infrastructure has emerged, which incorporates additional variables to more realistically reflect potential future outcomes.

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

One of our favorite natural resource companies, Ivanhoe has returned more than 146 percent in the past six months alone as investors anticipate the start of production at the Kakula Mine, which has the potential to become the world’s second-largest copper mining complex, with annual output projected to be 800,000 metric tonnes a year.

The U.S. stock market hit pause in early September, as investors took a harder look at market overconcentration and frothy sentiment. Meanwhile, global economies may be entering a new phase, and the Federal Reserve’s newly announced inflation policy is likely to keep U.S. rates lower for longer.

My theme today is on the pandemic’s future economic impact, especially in the United States.

We've updated this series to include the August release of the Consumer Price Index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $42,177, down 6.7% from 45-plus years ago.

Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.

The 20th century Baby Boom was one of the most powerful demographic events in the history of the United States. We've created a series of charts to show seven age cohorts of the employed population from 1948 to the present.

We've updated our monthly workforce analysis to include last Friday's Employment Report for August. The unemployment fell to 8.4%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 1.84M.

Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.

The Bureau of Labor Statistics released the August Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.31%, up from 0.99% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.74%, up from 1.57% the previous month and below the Fed's 2% PCE target.

The Federal Reserve has changed its inflation policy. Here’s what it may mean for markets.

Resiliency and diversification potential remain critical in a world with meaningful uncertainty ahead.

Sovereign bonds have long been the prime defensive asset for multi-asset portfolios. But in today’s extraordinary market conditions, should investors make more extensive use of other defensive choices?

The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution).

Note: This commentary has been updated with the latest numbers from Friday's Employment Report. Consider: Today nearly one in three of the 65-69 cohort and one in five of the 70-74 cohort are in the labor force.

The latest monthly employment report showed a gain of 1.37M nonfarm jobs, which consists of a gain of 1.33M service-providing jobs and a gain of 43K goods-producing jobs.

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns.

Private–sector payrolls rose by 1.027 million in the initial estimate for August. Normally, such a gain would be considered outstanding. However, in this recovery, that comes as a disappointment.

Market update from BlackRock's municipal bond team.

Equity investors in emerging markets (EM) typically focus on large-cap companies. But allocating to smaller companies can help broaden an EM allocation by providing a different mix of exposures to opportunities across countries and sectors—and can bring potential for higher added value.

The Northern Trust Economics team forecasts the U.S. economy’s recovery from COVID-19.

Today's release of the August Producer Price Index (PPI) for Final Demand was at 0.3% month-over-month seasonally adjusted, down from a 0.6% increase last month. It is at -0.2% year-over-year, up from -0.4% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.4% MoM, up from -0.5% the previous month and is up 0.6% YoY NSA. Investing.com MoM consensus forecasts were for 0.2% headline and 0.2% core.

Rotation away from the market’s prior momentum darlings continues. Friday’s jobs report had bullets for both the optimists’ and pessimists’ case studies. And improving productivity, partly due to work-from-home trends, could persist as a positive economic driver.

The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through July, is now available.

Passive bond funds – particular those that track the popular Barclay’s AGG index – offer the worst risk-return profile ever, according to Jeffrey Gundlach’s DoubleLine Capital.

Federal Reserve and other major central bank stimulus should benefit high-quality value stocks and foster inflation’s “green shoots” as the global economy emerges from recession.

After a wicked stock market decline into late March and impressive 60% advance off the low, it seems a stretch to expect still higher equity prices. However, a major extension to the post March rally is definitely supported by the five reliable long-term indicators featured in this research note. Their current position is far more consistent with a major long-term buying opportunity than a selling one.

US Economy Suffered Record Losses in First Half 2020. August Jobs Report Came in Much Better Than Expected. Business Bankruptcies Jumped 26% in First Half 2020. Trump Boat Parades Across the Country on Saturday

Seven reasons Americans are “nowhere near as alienated from their democratic system” as Germans in the 1920s.

A former AQR research head says Biden-Harris propose to tax 401(k) plans at both contribution and distribution.

Let's take a closer look at Friday's employment report numbers on Full and Part-Time Employment.

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $17,220 for an annualized real return of 10.92%.

At present, multiple jobholders account for 4.4 percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.

Take a look at real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite since 2000. We've updated this through the August 31, 2020 close

What does the ratio of unemployment claims tell us about where we are in the business cycle and recession risk?

The headline number for August came in at 100.2, up 1.4 from the previous month. The index is at the 56th percentile in this series.

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

The legendary fund manager, Bob Rodriguez, doesn’t like either stocks or bonds, but he explains the particular strategy he is pursuing for buying hard assets.

In the age of Anthony Trollope, in hindsight, the variable cash returns of common stocks and their dividends deserved greater premiums; the certainties of fixed income coupons deserved lesser ones. Our family office is betting on a similar shift in market discounting.

As against the widely touted long-run, expected real returns from equities of 6.5%, we show that the true expectation for global stocks is in the range of 4.5 to 5%.

Here’s the evidence.

The Fed’s strategic review added to a bevy of policy research revealed last week.

Supply is getting tight. Helium is notoriously difficult and expensive to store, for the very good reason that it escapes every known container over time.

The unintended consequences from recent Fed “policy” changes, not to mention those initiated in prior decades, have been at the very epicenter of some of the national problems we have. The Fed would vigorously deny this course, but the results are plain for all to see.

Here is a summary of the four market valuation indicators we update on a monthly basis.

• The Crestmont Research P/E Ratio
• The cyclical P/E ratio using the trailing 10-year earnings as the divisor
• The Q Ratio, which is the total price of the market divided by its replacement cost
• The relationship of the S&P Composite price to a regression trendline

Different investors will choose different paths in response to the challenge of low rates and high credit uncertainty. Some may want to fight the trend by taking on more risk to achieve a target level of income or return.