Are Low Job Claims an Omen for Faster Job Growth?

Last week in the capital markets was a “risk-off” week. We saw more signs that manufacturing is driving moderate economic growth. There was also some good news for the “residential investment” component of gross domestic product (GDP). It’s shaping up to be another year of the square root recovery…but still with core strength.

Claims Remain Low … An Omen of Faster Job Growth?

  • Initial jobless claims (293k) rose week over week (w/w) but stayed below the four-week average of 300k.
  • It’s remarkable how few employees are losing their jobs. In conjunction with the recent rise in the number of job openings, it suggests that maybe employers are finding themselves understaffed?

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Fed Pursues a Slow Pace – What Does it Mean for Investors?

The Federal Reserve Board’s policy-making committee convened on September 16-17 to discuss winding down its stimulus program. Janet Yellen, the Fed’s chairwoman, explained the results of the meeting in a news conference on September 17.

Is the Fed Being Too Accomodative?

If you look at the indicators the Fed has used in the past – the Taylor Rule for one, but there are others – they suggest the Fed is too easy and too accommodative. In fact, Ms. Yellen in her press conference acknowledged that the Fed is pursuing an easier policy than the common indicators would suggest. That doesn’t change anything they’ve done, but nonetheless, the declining unemployment rate, for example, and the increased pace of growth, are beginning to suggest rates are too low.

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“Don’t Fight The Fed” Has Been Good Advice in the Past

The Fed’s statement from its meeting last week contained few surprises but was slightly hawkish on a close reading. “Don’t fight the Fed” has been good advice in the past.  Maybe it’s different this time.  Maybe not. The year-end 2015 and 2016 “dot plot” forecasts for rates rose roughly 0.25% amidst slightly lower growth and inflation forecasts. Moderate economic growth continues, but homebuilding is not looking like a big GDP growth driver in 2014, yet inflation remains low, and there is little pressure on the Fed to hurry. Its balance sheet won’t shrink anytime soon, however. Continue reading

Mind the Gap

Economic fundamentals (the “real economy”) have been struggling to catch up with the buoyant behavior of financial markets and, eventually, these diverging patterns (gaps) will have to be reconciled. On the economic side, the main global structural imbalances (a mountain of debt, a lack of aggregate demand) remain very much in place and the multiple transitions that all the major economic areas are facing are far from being completed. The recent market dynamics would be inconceivable in a “normal” market cycle, but nothing is impossible in the fantastic world of Quantitative Easing (QE) and money printing. Continue reading

Did Fears of the Fed Spark Bond Market Selloff?

Last week in the capital markets: Bonds sold off globally in the week before the Fed meeting.

It was a quiet week for economic news, and the geopolitical front was relatively quiet (less fighting but more sanctions in Europe, moving toward a bigger effort against ISIS) but fears that the Fed is behind the curve seemed to be the ones that led investors and traders to act last week. Continue reading

The Vote for Scottish Independence: Which Way Will It Go?

In 2013, the governments of Scotland and United Kingdom passed the Scottish Independence Referendum Bill inviting all United Kingdom residents living in Scotland and aged 16 and over to vote on the referendum question: “Should Scotland be an independent country?” On September 18 2014, 4.3 million registered voters will vote “Yes” or “No” on Scottish independence. A simple majority is required to gain independence. Monica Defend, Pioneer’s Head of Global Asset Allocation Research, provided the summary that follows … Continue reading

ECB Tackles Low Growth and Falling Inflation

Attended by the world’s top central bankers, the European Central Bank (ECB) met in August for its regular monthly meeting in Jackson Hole, Wyoming. I thought I would share some insights from Tanguy Le Saout, Pioneer’s Head of European Fixed Income.

Anticipation was running high that the ECB would announce further measures to help tackle Europe’s twin problems of low growth and falling inflation. In a surprising move, ECB President Mario Draghi, deviated from his prepared speech. These and other unscripted remarks appeared to signal a significant shift in ECB policy. It raised hopes for the imminent announcement of a Quantitative Easing (QE) program and caused a substantial fall in European bond yields and the euro currency. With expectations high, did the ECB deliver? Continue reading

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