Posted on August 18, 2014 by Sam Wardwell
Last week’s data provided a mixed picture of the economy. Businesses produced more, but demand growth was soft. That combination suggests slower future economic growth, not acceleration (but still growth, not recession). Some points to note:
- The NFIB Small Business Optimism Index ticked up from 95.0 to 95.7.
- The Empire State (NY Fed) Index slipped, but remains strong at 14.7.
- Industrial production rose, led by auto production, and capacity utilization ticked up slightly as well.
- Business inventories rose modestly…slightly faster than sales.
- Consumer confidence slipped, despite good job market data…too many war/conflict/disease stories in the paper? That said, retail sales managed a 0.2% increase month over month (m/m) – still below expectations.
- Mortgage applications ticked down week over week (w/w); the generic rate dropped to 4.24%.
- Inflation remains comfortably below trigger levels for Fed tightening
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Inflation, Macroeconomics, Sam Wardwell, United States | Tagged: Capital Markets, Europe, Sam Wardwell, the Fed, US GDP | Leave a comment »
Posted on August 11, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended August 8, 2014
Ukraine developments, more than economic news, seemed to drive the day-to-day pattern of market returns. Russia first massed troops on the border, prompting NATO to warn of imminent invasion risks, then sent them back to their barracks, keying Friday’s rally. The conflict is far from over.
Developments in Gaza (a brief cease-fire) and Iraq—where Obama (reluctantly, it seems) authorized airstrikes against ISIS, leaving both domestic hawks and doves feeling unsatisfied—also made the front page, while central banks in Europe, England, Japan, Australia, and India all left policy essentially unchanged—not front page news. The global composite Purchasing Managers Index (PMI) made a new 9-year high in July at 55.5 ‑ but with war risks high, no one paid much attention. Continue reading
Filed under: Contributors, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Political, Sam Wardwell, U.S. Dollar, United States | Leave a comment »
Posted on August 4, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended August 1, 2014
The FOMC met last week, expressed satisfaction and maintained course. While their policy decisions (continue the taper—now $25b—and keep the Fed Funds rate where it is) were no surprise, the language of the Fed statement was tweaked to reflect the continued/continuing improvement in the economy and labor markets (e.g.: “the likelihood of inflation running persistently below 2% has diminished somewhat”). The Fed feels it is accomplishing its goal…so a continuation of policy normalization is appropriate.
At the same time, the Fed statement said “…a range of labor market indicators suggests that there remains significant underutilization of labor resources.” Analysis: the Yellen Fed is moving cautiously…with Japan and Europe still weak, the Fed appears willing to risk an inflationary boom in the U.S. to minimize the likelihood of having to fight a recession and/or deflation when it has a bloated balance sheet and low Fed Funds rate, but very robust tools to fight inflation. As I said on CNBC last week, a submarine commander doesn’t give the order to submerge when most of the hatches are closed.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, Uncategorized | Tagged: China, economy, Japan, labor market, Sam Wardwell, the Fed, Tipping Point, US GDP, Yellen's Fed | Leave a comment »
Posted on July 29, 2014 by Mike Temple
Last Wednesday, the SEC approved amendments on money market fund (MMF) rules. My colleague, Seth Roman, a portfolio manager who specializes in the sector, summarized the areas of reform as they relate to institutional and retail money market investors. I thought I’d share that with you here.
Filed under: Fixed Income Market Insights, Mike Temple, Mutual Fund Industry, Uncategorized | Tagged: Floating NAV, Fund Reform, Mike Temple, SEC Money Market Rules, Seth Roman | Leave a comment »
Posted on July 21, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended July 18, 2014
Federal Reserve Chairwoman Janet Yellen’s Congressional testimony this week, in my view, was not pointing to bubbles. In her testimony, she suggested that valuations of social media and biotech stocks and lower-rated corporate debt appear “stretched.” Some observers suggested she was saying we are in a bubble. But I have a different perspective: I think she was saying, in effect, “yes, prices are high in some niches, but not generally.” In any case, it’s doubtful Yellen is shifting her focus from less-than-full-employment to the question of possible market bubbles. Continue reading
Filed under: Contributors, ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Mutual Fund Industry, Political, Sam Wardwell, U.S. Dollar, United States | Leave a comment »
Posted on July 21, 2014 by Jonathan Chirunga
Follow-up to February’s article Puerto Rico: A Delicate Balancing Act.
In June of 2014 the Commonwealth of Puerto Rico’s legislature passed the Puerto Public Corporations Debt Enforcement and Recovery Act (the Act) for restructuring the outstanding debt of public corporations. Its passage got a cold reception from the municipal bond market. Continue reading
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Posted on July 17, 2014 by Giordano Lombardo
Summer is time for vacation, and getting ready for a trip has become almost a ritual for me: pack bags for my large family, load the car, don’t forget the GPS and check weather conditions. The last two points, I believe, apply not only to planning a safe and comfortable personal trip, but also to navigating the financial markets.
The financial “weather” seems nice: volatility is extremely low across almost all asset classes, as a consequence of the extra-loose monetary policy. However, as with the weather, we are aware that financial conditions can rapidly change. History suggests that periods of exceptionally low volatility should be treated with skepticism, as they have usually preceded vicious market turmoil. Continue reading
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Giordano Lombardo, Inflation, Macroeconomics, United States | Tagged: Bonds, Corporate Profits, Fixed Income, Market Bubbles, rising interest rates, Valuations | Leave a comment »
Posted on July 14, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended July 11, 2014
It was a tough week for Europe over all last week – industrial production declined in Germany, Italy, France, and the UK, with the details broadly downbeat. Trade (import and export) data, especially from Germany, was disappointing as well. But the big story in Europe last week came from Portugal, where Banco Espírito Santo (BES), a leading Portuguese bank, suffered a share price crash and trading was suspended after reports of financial irregularities.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Inflation, Macroeconomics, Sam Wardwell | Tagged: Banco Espirito, Capital Markets, consumer spending, labor market, Sam Wardwell, the Fed, Unemployment | Leave a comment »
Posted on July 7, 2014 by Sam Wardwell
It’s not surprising that World Cup Syndrome has historically been responsible for lower office productivity around the world – in fact, you may have seen the telling chart created by Bloomberg, which uses European Central Bank (ECB) data to track dips in trading volume during games in the 2010 World Cup.
Perhaps ‘WCS’ is owed a nod for last week’s drop in ISIS (Islamic State) activity? The so-called Group of Death (Syria, Iran, Iraq, and the caliphate formerly known as ISIS) was very quiet last week.
- ISIS renamed itself the Islamist State and said it was a caliphate.
- Iraq’s parliament appears frozen, with Sunni, Kurdish, and Shiite factions apparently unable to strike a deal.
- It appears that the Islamist State gained ground…but oil traders don’t seem worried.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Macroeconomics, Sam Wardwell | Tagged: Capital Markets, Central Banks, ECB, Europe, Sam Wardwell, World Cup, World Cup Syndrome | Leave a comment »
Posted on June 23, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended June 20, 2014
Iraq news didn’t spark a flight to safety and it’s not yet clear whose side we’re on (or should be on). Fed policy seems to be on autopilot, which the markets interpret as dovish. As expected from last week’s FOMC meeting, there was no change to the taper pace or rate policy. The statement’s wording and forecasts were tweaked only slightly from the previous. Higher inflation readings and stronger labor market data didn’t lead to a material change in the language. For the Fed to react so little to the labor and inflation data apparently led “the market” to think the Fed is even more dovish. The market apparently expects the Fed to be even more dovish than the Fed expects to be. December Fed Fund futures are trading around 1.75%‑well below the Fed’s 2.5% projection. Continue reading
Filed under: Contributors, ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Political, Sam Wardwell, U.S. Dollar, United States | Tagged: China, economic indicators, government policy, U.S. unemployment | Leave a comment »