“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

A Quick Summary of the SEC’s New Money Market Rules

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.

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Labor Market Looking More “Healed” Than “Healing”

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

March – In Like a Lion? Not as Far as The Economy is Concerned

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.

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Last Week’s Jobs Report Not as Bad as it Sounded, Same for Capital Markets

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

What is the Current Market Reality?

The Current Market Reality:  Economic Transitions, Equities & Alternatives

At this year’s Global Investment Forum, the discussion among Pioneer investment professionals was generally positive. Of course, everyone was conscious of the current market reality:  that the major force behind recent positive, though benign, market trends is the unprecedented creation of liquidity and extremely loose stance of monetary policies around the world. Monetary policy alone cannot be the only conduit to a new economic model of income growth and job creation. Continue reading

Debt Limit Extended, Fed Policy in the Wings – What to Expect from the Markets

Last night Congress reached an agreement to raise the debt limit and end the 16-day shutdown. After all the acrimony and tense negotiations, the deal passed by a comfortable margin with 81-18 vote in the Senate and 285-144 in the House.

Key details of the deal:

  • The government reopens on October 17, 2013.
  • Congress will provide spending authority through January 15, 2014 at the same spending level in effect prior to the shutdown.
  • The debt ceiling is extended until February 7, 2014.
  • Reality check: the real deadline will be sometime in mid-March, according to Goldman Sachs. The agreement allows the U.S. Treasury to utilize bookkeeping strategies known as “extraordinary measures” once the debt limit is breached on February 7th. Continue reading
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