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Weekly Update


 

Jobs Numbers

Employment is growing at a slower pace. This is gleaned from the August payroll report that reported the U.S. economy added just 130,000 jobs, down from an average of 190,000 a month over the past eight years, since we emerged from the great recession. Moreover, this 130,000 figure was somewhat padded by the census bureau adding 25,000 temporary workers to the federal government. Continue Reading…

Relatively Quiet Trading Week

From an economic release perspective, it was a tame week over the previous five trading days. The second estimate for second quarter GDP came in at 2.0%, revised slightly downward from 2.1% ‐ nothing earth shattering here. More significantly, Consumer Confidence declined at the margins in August, following the July rebound.   Continue Reading…

More Tweets and More Volatility

It really is about tweets and trade. It was a wild week and by the close on Friday, domestic stocks had fallen ‐1.5% while bonds were little changed. Surprisingly, foreign stocks rose 86 bps for the week as small caps outperformed their larger brethren. Domestic and foreign equity REITs followed their respective stock indices as the correlation of these investments remains historically high. Continue Reading…

Flight to Safety

Equities experienced losses this past week on the order of ‐1.0% to ‐2.1%, depending on your index of choice, while most fixed income indices increased in value by 1.0% to 1.2%. This theme has become somewhat routine and has resulted in a bull market in bonds for 2019. As we like to say, don’t fight the fed and this decreasing rate environment, along with the flight to safety, has translated into a YTD return for domestic bonds on the order of 8.8%. This is truly stunning, the 10‐year treasury is now yielding a fraction under 1.6%. Investors seem to still be on edge with the U.S. and China trade dispute, weakening economies in Europe and slowing corporate earnings. Continue Reading…

Tweets, Trade, and PPI

From an economic release perspective, the most significant news last week was a PPI figure increasing by 0.2% in July. This brings the 12‐month number to 1.7% ‐ certainly not a harbinger of inflation to come. Of course, this release was overshadowed by tweets and trade war headlines, most notably between the U.S. and China. With a steady diet of volatility during the week, by the close of business on Friday, domestic stocks had fallen a mere 40 bps with large caps holding up much better than smaller fare. Overseas developed equity markets were down around ‐1.1% with emerging markets falling by ‐2.2%. As to be expected bonds increased in value with domestic issues rising by 57 bps and foreign 48 bps (hedged). Even EM debt got into the game with the largest increase for the week at 1.1%.  Continue Reading…

Volatility Returns

We said “look out for volatility ahead” last week and that is certainly what we got ‐ on the downside. But let’s first take a step back and look at some good news. Most importantly, hiring remained strong as another 164,000 jobs were created last month while unemployment held at 3.7%, close to a 50‐year low. So far in 2019, the average monthly job creation number is 165,000, which is somewhat lower than the 2018 monthly average of 223,000. Consumer confidence rebounded in July and now stands at 135.7, up from 124.3 in June.  Continue Reading…

GDP Showing Signs of Slowing Economy

The big news last week was a slowing domestic economy. Coming in at 2.1, GDP experienced a significant drop from the 3.1% annualized pace of the first quarter. Looking into the number a bit deeper showed consumer spending remained strong, but business investment dragged down the end result. Non‐residential fixed investment, which is comprised of spending for software, research & development, equipment and structures, fell at a 0.6% rate compared with the 4.4% increase for the previous quarter. Continue Reading…

Will Fed Cut Rates 25 or 50 bps?

Whether it’s Jerome Powell, Jon Williams ‐ the vice chairman of the rate‐setting FOMC ‐ or other notable people at the Fed, the markets are hanging on every word. And they all are signaling a rate cut in the very near future. The problem now is this cut is certainly priced into most markets and expectations are becoming somewhat speculative. For example, there is a growing consensus this cut will be 50 bps rather than the standard 25 bps. Continue Reading…

Inflation Remains Tame

Jerome spoke and the markets certainly listened. At least three of his talks last week were followed closely by the markets and after he all but guaranteed a cut in the Fed’s baseline interest rate (possibly as soon as this month), stocks rallied. Domestic equities increased by 73 bps, led by large cap issues. Commodities also received a boost as the price of oil, which aside from OPEC often tracks the global economic outlook, rose over 4.5% for the week. Adding further fuel to the rally were the latest inflation figures that, once again, showed this data point to continue its benign ways. Both the PPI and CPI rose by a mere 0.1% last month.  Continue Reading…

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