Posted on March 3, 2014 by Sam Wardwell
Last week’s U.S. economic data was again on the soft side, but we still can’t rule out bad weather as the cause. New factory orders for durable goods were down 1% month over month (m/m) in January but up 4.6% year over year (y/y). Excluding the volatile transportation segment, they were up 1.1% m/m and 1.2% y/y. This is consistent with bad weather superimposed on a slowly-growing economy – no big surprise. In other data:
- The Markit flash services PMI fell from 56.7 to 52.7 . . . still above 50.
- The Chicago Fed’s National Activity Index fell to - 0.39
- The (local-focus) Chicago-area PMI was strong, at 59.8.
- The Kansas City Fed index came in at +4, even after citing weather as a headwind.
- The Richmond Fed index fell to -6 . . . details were weak . . . weather is blamed.
- The Dallas Fed’s February Manufacturing Outlook Survey showed general business activity, at 0.3, barely in positive (slow-growth) territory. However, factory activity was notably strong, rising for the tenth month in a row.
- Initial unemployment claims rose to 348k – the high end of the recent range.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Mutual Fund Industry, Sam Wardwell, United States | Tagged: China, currencies, Japan, Sam Wardwell, Slow growth, the Fed, U.S. housing market, Ukraine | Leave a comment »
Posted on February 24, 2014 by Giordano Lombardo
Pioneer Investments’ Head of Global Asset Allocation Research, Monica Defend, assesses the progress of Abenomics – the series of economic reforms implemented by the government of Prime Minister Shinzo Abe – and discusses her outlook for the Japanese market.
What has the new policy course known as Abenomics achieved and what is yet to be done?
Japan managed to exit a long stagnation, also marked by deflation, thanks to aggressive monetary expansion. That was probably the easy part of Abenomics, as it got a major implicit endorsement from the U.S. Federal Reserve; Japan’s quantitative easing accounted for an even larger part of GDP than the U.S. version, but had the Fed not led the way with quantitative easing, we have legitimate doubts that it would have been as effective.
Filed under: Equity Market Insights, Fixed Income Market Insights, Giordano Lombardo, Macroeconomics, Political | Tagged: Abenomics, Giordano Lombardo, Japan, Japanese economic reforms, Monica Defend, Shinzo Abe | Leave a comment »
Posted on February 18, 2014 by Sam Wardwell
The weather has certainly been bad . . . but some of last week’s economic data suggests that the weakness is not just weather-related (e.g. construction jobs have held up relatively well, online sales have been weaker than those of bricks-and-mortar.)
- January retail sales fell, and December was revised down.
- With sales soft, the retail inventory:sales ratio ticked up. The factory-level ratio has also ticked up; the wholesale ratio has not.
- Industrial production fell 0.3% in January. Manufacturing output fell 0.8%, while the cold weather boosted utility output 4.1%.
- Capacity utilization slipped from 78.9% to 78.5%.
- Bucking the negative trend, the NFIB small business sentiment index rose 0.2 to 94.1.
It’s not weak enough yet for the Fed to signal they might slow the QE taper, but the stock market seemed to display a “bad news is good news” complacency.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, U.S. Dollar, United States | Tagged: Capital Markets, Central Banks, China, currencies, ECB, emerging markets, Europe, Fed Action, Italy, Japan, QE Tapering, Sam Wardwell | Leave a comment »
Posted on February 10, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended February 7, 2014
The jobs reports were better underneath than on the surface
The data: Initial unemployment claims for the month were 331K. The “establishment survey” showed headline employment growth of 113k, below consensus expectations of 189k. The details were less disappointing, however.Prior months were revised up by 34k. Wages continued to rise slowly. The household survey — the basis for calculating the unemployment rate — showed employment rising by 616k. But because the labor participation rate rose 0.2 to 63.0%, the estimated workforce rose by 499k and the unemployment rate fell only to 6.6%.
The upshot: The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 514k (so, by implication, the number of full-time workers rose by 1.1 million!). Finally, we got the periodic revisions to the past year’s data, the net effect of which was to revise 2013 job growth up from 2.19mm to 2.32mm.
Comment: There’s often a pretty big divergence between the “household” and “establishment” surveys. It’s not unusual to have discrepancies . . . they tend to vary month-to-month but converge over time. Continue reading
Filed under: Contributors, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Mutual Fund Industry, Political, Sam Wardwell, U.S. Dollar, United States | Tagged: CBO, employment, Obamacare, Unemployment | Leave a comment »
Posted on February 3, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended January 31, 2014
- In the Economy: Some weak national data but good regional reports
- In Housing: No good news last week … maybe just the weather?
- In Europe: Mixed news
- In Japan: Signs of strength heading into the tax hike
- In Washington: Time for the debt ceiling to take center stage
- In the Capital Markets: The yen and Treasuries outperformed
The Markets Are Acting Skittish, But Data Seems Just Fine . . .
The weather has been a wild card, but the economy carried its momentum into the New Year. Details in last week’s flash 4Q GDP report (first of three) were generally solid, with no big surprises. The report showed solid real GDP growth at a 3.2% rate (and nominal at 4.5%). That strong data was reflected in corporate results, as roughly half the S&P 500 companies have reported; sales are ahead of consensus at 2/3 and earnings are above consensus at 3/4. The second-half acceleration in the economy that we at Pioneer were expecting seems to be coming through.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, United States | Tagged: Capital Markets, debt ceiling, economic data, emerging markets, Europe, Fed Action, Fed tapering, GDP, housing, Japan, Sam Wardwell, Washington | Leave a comment »
Posted on January 13, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended January 10, 2014:
- Friday’s labor market report was disappointing – and a little noisy
- Bond markets rallied on weak job growth
- U.S. economic news: More positives than negatives
- Eurozone news: Not good, but getting better
- China news: Is slower export growth really a sign of global weakness?
The FOMC Minutes Drew Little Market Reaction, but Contained Hidden Message
Harry Truman once famously asked for a one-armed economist, one who couldn’t say “but on the other hand…” On this score, while there were no real surprises or new insights in its minutes, the FOMC is an octopus with an extra arm: the minutes paint the picture of a committee with a range of views on every question – the antithesis of consensus. If decisions are, as the Fed continually reminds us, data-driven, and if there’s no consensus on the committee, how much weight should you put on the Fed’s forward guidance? I suspect the message is: not too much.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, U.S. Dollar, United States | Tagged: Bonds, Capital Markets, China, currencies, emerging markets, equity markets, Europe, Fed policy, FOMC minutes, Labor Report, Sam Wardwell | Leave a comment »
Posted on January 6, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended January 3, 2014
Extended unemployment benefits stopped for 1.3 million people at year-end. This doesn’t change their employment status . . . they just stop getting unemployment compensation. Extended benefits (of up to 99 weeks) was part of the recession-fighting fiscal stimulus package. A question was: did this create a dis-incentive to find a job (aka “funemployment”). Continue reading
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Political, Sam Wardwell, United States | Tagged: benefits extension, funemployment, Unemployment | Leave a comment »
Posted on December 30, 2013 by Sam Wardwell
Weekly Market Report
Observations on the Capital Markets – Week Ended December 27, 2013:
- Signs of acceleration for the U.S. economy
- Still mixed news on housing
- Meanwhile, in the markets, Santa Claus came quietly to town
- In China, the cash crunch eases
Signs of Acceleration for the U.S. Economy Last Week . . .
Last week’s economic news was generally strong, providing momentum for the economy as we step into 2014. The U.S. Q3 GDP growth rate was revised up to 4.1%, and the Chicago Fed National Activity Index (a weighted average of 85 monthly indicators of national economic activity) rose in November, signaling an accelerating economy.
- New factory orders for durable goods rose in November – up 10.9% year over year (y/y).
- Initial unemployment claims dropped to 338k.
- Personal Income rose 0.2% month over month (m/m) in November (2.3% y/y).
- November consumer spending hit the highest level in five months – up 3.5% y/y.
- Still no inflation: the PCE (Personal Consumption Expenditures) Price index was up 0.9% y/y; core was up 1.1%.
Filed under: Equity Market Insights, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, Uncategorized | Tagged: Bonds, China, currencies, emerging markets, Europe, Fed Action, Sam Wardwell, US GDP, year end update | Leave a comment »
Posted on December 23, 2013 by Sam Wardwell
Observations on the Capital Markets – Week Ended December 20, 2013
Developed market stock markets had generally traded down in the first two weeks of December; they were up strongly last week, catalyzed by the Fed announcement it would begin tapering its monthly bond purchases de-signed to spur growth and employment.
The S&P 500 and MSCI Japan indices were each up 2%; MSCI Europe index was up 3%. Within the S&P 500, In-dustrials and Materials led; Telecoms and Consumer Sta-ples lagged as cyclicals continue to outperform defensives in December. The Fed decision powered the dollar to gains of roughly 1% against the Yen and 0.4% against the Euro (the Yen fell to a five-year low against the dollar).
Bonds seemed to take the Fed’s actions in stride, although high yield bond spreads, as measured by the BofA ML High Yield Master II Index, narrowed 8 basis points to 404, a new cycle low. That’s more than the economic news would seem to justify—but it’s consistent with the stock market’s positive action.
European and Japanese bond markets were quiet, but China’s money markets are experiencing a liquidity crunch—generally thought to be cyclical (year-end) noise, but spill-over effects are possible. Oil continues to rise off its end-November bottom, rising 3% to just below $100. Gold was down 3% (Fed tapering), falling to below $1,200. Continue reading
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Posted on December 19, 2013 by Sam Wardwell
The Fed’s taper announcement might have been its most closely watched announcement of all time. We pretty much knew what was basically going to happen (eventually taper QE, strengthen forward guidance), we just didn’t know exactly when and exactly how much. Now we know.
The Fed will reduce its bond purchases from $85 billion/month to $75 billion/month in January. In the Q&A, Bernanke suggested purchases might be cut another $10 billion at each upcoming FOMC meeting — implying the program would end in late 2014. It also strengthened “forward guidance”, saying it would keep the Fed Funds rate at current levels “well past the time that the unemployment rate declines below 6.5 per cent.”
Immediate market reaction: good news is good news Continue reading
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