Posted on September 29, 2014 by Sam Wardwell
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?
Filed under: Equity Market Insights, GDP, Macroeconomics, Political, Sam Wardwell, United States | Tagged: Capital Markets, employment, equity markets, Europe, European markets, Eurozone, markets, Sam Wardwell, Ukraine, Unemployment, US GDP | Leave a comment »
Posted on September 16, 2014 by Sam Wardwell
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
Filed under: ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Sam Wardwell, U.S. Dollar, United States | Tagged: Bonds, Capital Markets, currencies, ECB, emerging markets, Fed Action, inflation, Interest rates, Sam Wardwell, US GDP | Leave a comment »
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 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 24, 2014 by Giordano Lombardo
Pioneer’s Head of Global Asset Allocation Research, Monica Defend, along with U.S. and Latin America Global Asset Allocation Research Economist, Annalisa Usardi, recently released an update on the U.S. economy. The update was based on the Bureau of Economic Analysis’ (BEA) release of the third and final estimates 1Q14 gross domestic product (GDP), which came in lower than expected. The forecast update focuses on three areas: growth, inflation and central bank policy. Below are some highlights from their report. To read the full report, click here. Continue reading
Filed under: GDP, Giordano Lombardo, Inflation, Macroeconomics, United States | Tagged: Fed policy, inflation, Interest rates, QE Tapering, US GDP | Leave a comment »
Posted on June 30, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended June 27, 2014
Summer, summer, summertime – time to sit back and unwind. The Fresh Prince and DJ Jazzy Jeff might have been talking about the quiet tone last week in the capital markets.
- Can you spell Goldilocks? Stocks, bonds, and commodities all rallied in the first half of 2014…for the first time since 1993.
- Currencies: The Euro and Yen each rose 0.5%-1% against the dollar, extending their gains for the month.
- Bonds: The 10-year Treasury yield fell 9 basis points (bps) to 2.54%; the 10-year TIP yield fell 8 bps to 0.27%.The Bank of America Merrill Lynch High Yield Index (BoAML HY) widened 1 bp to 3.48%. The Japanese 10-year bond fell to 0.55%, a 2014 low. Eurozone bond markets were generally quiet.
- Equities: The S&P 500 Index declined almost imperceptibly last week. Within the index, Utilities and Consumer Discretionary (each up 1.0%) led; media companies rallied when the Supreme Court effectively shut down Aereo. Industrials (-1.7%) lagged; Consumer Staples (-1.3%) and Energy (-0.9%) were also weak. MSCI Europe and Japan were each down 1.5-2%. The MSCI Emerging Markets Index was down a bit.
- Commodities: WTI Oil was down about $1 (1%)…still not really reacting to Iraq. Gold, up 3% last week, gained another $5 (0.5%).
Filed under: Equity Market Insights, Europe, GDP, Inflation, Macroeconomics, Political, U.S. Dollar, United States | Tagged: Capital Markets, currencies, ECB, economy, emerging markets, employment, equity markets, Europe, European markets, Fed Action, GDP, housing, inflation, Japan, Sam Wardwell, Ukraine, US GDP | Leave a comment »
Posted on April 21, 2014 by Sam Wardwell
The Fed’s “Beige Book” painted a beige—or is it Goldilocks?—picture of the economy, as most districts reported economic activity growing at a modest/moderate pace, employment generally rising, and wage pressures still generally well-contained. Nothing suggested cause for the Fed to change its plans or guidance.
- Indeed, in her speech last week, Fed Chairwoman Janet Yellen said that she thinks the U.S. is at least 2 years away (maybe more) from reaching full employment and that inflation pressures remain subdued, so tightening policy any time soon would probably be premature.
- With that said, her speech wasn’t all that dovish. She didn’t make new promises or push the envelope; rather, she reiterated that Fed policy remains data-dependent and the Fed “must always be prepared to respond” to rising inflation.
- Somewhat worryingly (for those who worry about these things), she stressed the mandate of maximizing employment and acknowledged the responsibility to constrain inflation, but made no mention of preventing asset price bubbles in things like stocks, houses, or things that yield 5%.
Business and Consumer Activity Rebounding
Early in the week, the Empire State (NY Fed) survey disappointed, slipping from 5.6 to 1.3 on weak new orders. Later in the week, the Philadelphia (Mid-Atlantic) Fed index surprised on the upside, rising from 9.0 to 16.6 on strong new orders. The market’s reaction suggests Philadelphia trumps New York.
Filed under: ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Sam Wardwell | Tagged: Bonds, Capital Markets, China, ECB, Europe, Fed tapering, GDP, inflation, Sam Wardwell, Slow growth, Ukraine, US GDP | Leave a comment »