Economic Update 12-04-2023 

• Economic data for the week included Q3 GDP being revised slightly higher, while PCE inflation continued to decelerate. Manufacturing data remained contractionary on net, and new and pending home sales fell back. 
• Stocks gained globally as falling inflation and central banker comments led to hopes for lower interest rates next year. Bonds fared especially well, due to a drop in long-term rates leading to a strong duration effect. Commodities were mixed to down, with higher gold prices offset by weaker crude oil, despite OPEC+ production cuts. 

U.S. stocks fared positively to end November. In fact, the month’s S&P total return of 9.1% was the best single month in over a year. Positive sentiment was related to slower PCE inflation reading during the week, showing further deceleration in prices. More so, this was tied to some optimistic comments from Fed board member Waller, who has been seen as hawkish up until now, having updated his view of inflation ultimately getting back to 2% with current policy, and better chances of even ‘lowering the policy rate’ over the next 3-5 months. Markets jumped on the news, as this provided some hope for even more substantial rate cuts next year. However, before this exuberance got too out of hand, Chair Powell attempted to quash these dovish expectations, hinting at the still-possible chance of rate hikes ‘if’ data demands it. Seemingly now that probabilities are high that we’re at ‘peak’ Fed funds rate, the question of year-end has turned to rate cuts. 

Economic Update 11-27-2023 

• In a holiday-shortened week, economic data included the index of leading economic indicators continuing their slide downward over the past half-year. Durable goods orders also declined, as did existing home sales. On the positive side, jobless claims fell back. 
• Equities were slightly higher last week, on light volume in the U.S. and few dramatic data releases. Bonds were mixed as interest rates ticked slightly higher, but spirits were boosted by a decent auction for long-term U.S. Treasuries. Commodities were also mixed with gains in metals offset by a slight drop in oil prices. 

U.S. stocks ended the light volume holiday week slightly higher, with minimal economic information to review. Every sector ended in the positive, led by health care and consumer staples, while energy lagged with minimal gains, following minimal change in petroleum prices. The closely-watched earnings news from Magnificent 7 member Nvidia resulted in a beat of earnings and revenue expectations, but a stock price decline related to forward-looking guidance related to China. Otherwise, the drama for the week included the conclusion of the OpenAI executive suite drama, following the firing of the CEO, his move to primary investor Microsoft, and then a return to the artificial intelligence firm by Thanksgiving after an employee revolt. The newsworthiness of this is less financial in the near-term, but remains tied to excitement about which firms become most dominant in AI and the battle over commercialization—much of which remains to be determined. 

Economic Update 11-20-2023 

• Economic data for the week included producer and consumer inflation readings decelerating far faster than expected, boosting the mood of financial markets. Manufacturing releases were mixed, as was housing data, while retail sales fell back a bit. 
• Global equities saw gains as consumer price inflation eased, leading to lower interest rates. Bonds gained accordingly as well. Commodities were mixed, with gains in metals offset by a continued drop in crude oil as supplies stayed elevated. 

U.S. stocks fared positively last week, with a sharp recovery in small cap outgaining large cap. This was despite starting the week negatively, as markets took notice of Moody’s ‘downgrade’ of its U.S. debt outlook from ‘stable’ to ‘negative’ as the prospect of another U.S. government shutdown loomed (deadline being Friday). However, the long-awaited consumer price inflation report showed strong improvement, with positive sentiment carrying over to much of the rest of the week. Congress passed a continuing resolution bill to extend government funding at current levels until late January 2024, using a ‘staggered’ approach. This brought some relief as well, although the risk of a government shutdown next year remains high as both sides have found little to agree upon. Perhaps there was also a bit of positive sentiment from the President Biden-President Xi meeting in San Francisco, if only as it perhaps lowered geopolitical surface tensions between the U.S. and China somewhat. 

Economic Update 11-13-2023 

• In an oddly quiet week for economic data, consumer sentiment declined, jobless claims were little changed, while the Fed’s bank loan officer survey showed continued tighter standards. 
• Stocks were mixed globally with gains in the U.S. large cap group and a small increase in Europe offset by declines elsewhere due to mixed sentiment, mixed data, and disappointing central bank communications. Bonds generally declined as interest rates ticked back up. Commodities lost ground generally, led by a drop in crude oil prices with fewer geopolitical concerns. 

U.S. stocks were mixed on the week, with large caps experiencing gains, while small caps weakened. Equities generally fared well other than Thurs., when Fed Chair Powell reiterated in a speech that policy remains ‘restrictive,’ and the FOMC is keeping all options open. More directly, he noted the FOMC was ‘not confident’ that policy was restrictive enough. In contrast to the more dovish post-FOMC meeting message the prior week, this was taken more hawkishly (likely intentionally, to offset the earlier message). Other than communication, however, little else has changed. Threats of a government shutdown in a week loom again, with odds of a temporary extension until the new year remaining the highest probability case. 

Economic Update 11-06-2023 

• Economic data for the week included the Federal Reserve holding interest rates steady, ISM manufacturing and services both showing declines, gains in home prices, while the employment situation report showed job positive gains, but at a weaker pace than expected. 
• Equities rose globally as hopes of central bank peak rates looked increasingly likely, and acceptable (not too good or too soft) U.S. economic data. Bonds fared positively as interest rates declined sharply following the FOMC meeting. Commodities were mixed, with crude oil prices pulling back. 

U.S. stocks experienced sharp gains last week, in fact the best week of 2023 thus far. Early week results were strong with news of a tentative agreement between the United Auto Workers and GM. The somewhat dovish comments from the FOMC after their policy meeting mid-week also appeared to strongly propel sentiment for several days, as chances for a December hike appear to remain low. Friday’s weaker jobs report also provided some reassurance that labor markets might be cooling, also lessening the chances of further tightening needs. There appeared to be high volume from larger firms as well, including tax loss trades before the common Oct. 31 fiscal year end. 

Economic Update 10-30-2023 

• Economic data for the week included U.S. GDP growth for Q3 coming in over double that of the prior quarter. Durable goods orders also came better than expectations. In housing, new home and pending home sales both exceeded estimates. 
• Equities fell back as several growth metrics led investors to assume continued higher interest rate policy. Bonds fared positively as yields actually fell back. Commodities were mixed with a small decline in crude oil offset by a spike in natural gas. 

U.S. stocks fell most of last week, ending in the negative, with mixed corporate earnings reports and continued worries about potentially higher interest rates. The robust GDP report also poured cold water on sentiment, as this raises the chances of the Fed either raising rates further or pausing for longer, and certainly reduces the odds of rate cuts any time soon. It’s safe to say that the Fed funds situation continues to outweigh any other market factors. Despite the long-awaited election of a Speaker of the House, odds of a government shutdown after Nov. 17 remain high, as there is little common ground between the parties. However, another temporary extension remains in the cards as well, buying a few more months. 

Economic Update 10-23-2023 

• Economic data for the week included the leading economic indicator index continuing to fall back. Housing data was mixed with existing sales down but starts up. On the positive side, retail sales and industrial production gained for the prior month. 
• Equities lost ground worldwide, due to uncertainty over the Israel/Gaza conflict, and interest rates continued to tick higher. Bonds struggled due to the same interest rate concerns. Commodities earned small gains in a variety of sectors. 

U.S. stocks fell back last week, pressured by Middle East geopolitical concerns, higher interest rates, and central bank comments that tilted hawkish. Earlier in the week, strong retail sales and industrial production weighed on markets as the ‘good news is bad news’ narrative took hold; then, Fed Chair Powell reiterated that inflation still remains ‘too high’ and the Fed should remain ‘cautious’ amidst strong economic growth. This added to the rising possibility of another policy rate hike—while not signaled for the next few weeks, the last meeting of the year remains a possibility. CME Fed funds futures for the Nov. 1 meeting still point to 99% odds of no change, while they’ve risen to over 30% for December. While several members have noted that we may be at ‘peak rates,’ others are less committal or even hawkish, adding to the uncertainty that markets dislike.  

Economic Update 10-17-2023 

• Economic data for the week included producer price inflation decelerating further on a year-over-year basis, while consumer prices remained somewhat sticky. Consumer sentiment also fell back, with higher inflation expectations. 
• Equities rose in the U.S. but were little changed overall in foreign markets. Bonds fared positively, as interest rates came back down from highs as investors sought a bit of safety. Commodities rose due to higher prices for crude oil and gold, related to geopolitical concerns in Israel and the Middle East. 

U.S. stocks began on a weak note, as the prior weekend’s Israeli/Gaza conflict brought up worries of greater regional instability (potentially including Iran), which has the potential of pressuring oil prices even higher. An escalation appeared to be passing financial threat, while a little-changed CPI report proved frustrating for stocks, although the S&P ended the week positively. Sectors were led by a sharp over-4% rise in energy, as well as utilities as interest rates fell back a bit; consumer discretionary, communications, and materials lagged with small declines. 

Economic Update 10-11-2023 

• Economic data for the week included ISM manufacturing staying in contraction, but continuing to improve, while ISM services slowed a bit, but continued to expand at a rapid clip. The employment situation report surprised to the upside, as did job openings earlier in the week. 
• Global equities were mixed, with net gains in U.S. large cap, while small cap and international stocks declined. Bonds also fell back again due to interest rates inching higher. Commodities declined as crude oil prices pulled back sharply. 

U.S. stocks ended positively, despite starting weaker, due to Fed comments continued to allude to ‘higher for longer,’ in respect to policy interest rates. This was in addition to decent economic data earlier in the week, such as the ISM reports and JOLTs. Rep. McCarthy was removed as Speaker of the House, which doesn’t bring any immediate impacts, but alludes to the trickle-down effect of rising chances for a government shutdown in mid-November when the temporary stopgap bill runs out. To end the week, Friday’s surprisingly strong employment situation report reversed prices back into the negative before recovering. This represented more ‘good news is bad news’ in the vein that a continued strong labor market provides the Fed with even more cover for their higher-for-longer narrative. Going into the new week, conflict in Israel over the weekend is expected to add to near-term volatility, as oil prices have often been affected by instability in that region. 

Economic Update 10-04-2023 

• Economic data for the week included U.S. GDP for Q2 unchanged from prior editions, while expectations for Q3 remain far higher than trend. Durable goods orders rose a bit, although after-inflation results remained depressed. Housing data was mixed, with home prices remaining on an upward trend, while new home sales fell sharply. 
• Global equities fell back last week, as the ‘higher for longer’ interest rate message from central banks was a worldwide negative. Bonds fell back as well, due to the further rise in yields, with foreign bonds pressured downward by the stronger U.S. dollar. Commodities were mixed with oil up only slightly last week.

U.S. stocks were lower again last week, on the heels of the expected government shutdown, UAW strike, higher oil prices, resumption of student loan repayments, and fear of higher rates for longer, as discussed above. By sector, energy led with a gain over a percent, growth stocks suffered minimal declines on the week on net, with flattish results for technology, communications, and consumer discretionary. Utilities suffered the most, down nearly -7% largely due to higher interest rates but also largely the result of a sharp decline in the largest sector component (NextEra Energy), which skewed the results. Real estate also fell back over a percent, being affected by higher interest rates. Mid and small cap stocks bucked their recent trends, showing gains for the week. 

Economic Update 9-25-2023 

• Economic data for the week included the Federal Reserve keeping interest rates unchanged but kept language relatively hawkish. Housing data was negative, with a drop in existing home sales as well as starts and homebuilder sentiment, although building permits improved. The index of leading economic indicators remained in a negative trend. 
• Global stocks fell back last week, due to the hawkish tone of central bank commentary, as opposed to actual rate hikes done, as well as idiosyncratic economic stresses. Bonds fell back, directly due to the rise in longer-term yields. Commodities were mixed, with crude oil prices little changed for the week. 

U.S. stocks began decently, but fell back starting just after the FOMC meeting, as investors took Chair Powell’s comments regarding policy as ‘higher rates for longer.’ Naturally, this serves to pressure the economy, and notably earnings, further. The UAW strike has also intensified from only three plants to now nearly 40 around the nation, with uncertain duration and impact, in addition to a potentially upcoming government shutdown. Thursday’s decline, while not severe, was the largest in six months. As it stands, the S&P 500 is down -6% from its peak in late July (drawdowns can be stealthy, with September again proving its negative reputation). 

Every sector declined in value last week, led by consumer discretionary down -6% (pulled down by Tesla and Amazon, together which represent 50% of the sector, among others), as well as more cyclical materials and financials. As expected, more defensive utilities, health care, and consumer staples held up better, with lesser but still-present declines. Real estate fell back over -5% with a significant move higher in interest rates, affecting financing conditions and required cap rates. Small cap stocks fared significantly worse than large cap, presumably more negatively affected by higher financing rates as well. 

Economic Update 9-18-2023 

• Economic data for the week included mixed producer and consumer inflation results, with headline numbers driven by higher energy costs. Retail sales, industrial production, and regional manufacturing results showed gains for the prior. 
• Equities ended with flattish returns in the U.S., underperforming foreign stocks, which saw gains. Bonds fell back along with higher interest rates across the yield curve. Commodities gained last week, led by continued supply concerns in crude oil. 

U.S. stocks ended flattish on the week, with sectors mixed, seeing gains in utilities, consumer discretionary (solely due to gains in Tesla), and financials. Technology was the sole decliner of several percent, with some degree of disappointment about Apple’s annual fall product event last week. Real estate ticked slightly higher, despite a rise in interest rates. Stocks closed the week on a sourer note, as data from China came in more positively, weakening the case for additional stimulus there that markets had hoped for. The U.S. auto worker strike also began, being the first time where all three domestic automakers were targeted in a century, which economists have predicted could negatively affect spending and GDP growth if it continues for an extended period. At the same time, decent economic data and rising energy prices as of late threatens another Fed rate hike—even if not for this coming week’s meeting (as futures markets point to overwhelming odds of no change). 

Economic Update 9-11-2023 

• On a shortened holiday week, economic data was positive, which included ISM services sentiment coming in stronger than expected, and jobless claims falling a bit. 
• Global equities fell back as interest rates rose in conjunction with the still-decent U.S. economic data. Bonds fell in line with slightly higher yields, and a stronger U.S. dollar held back foreign debt markets. Commodities were mixed, with weaker metals offset by a continued rise in the price of crude oil. 

U.S. stocks fell back in the shortened holiday week as decent economic data (stronger ISM services and lower jobless claims) resulted in a creep higher for interest rates. However, later in the week, some Fed comments were taken dovishly, that policy rate hikes may be finished. By sector, conditions were mixed, with gains in energy coming along with higher petroleum prices, as well as defensive utilities. By contrast, industrials, materials, and technology all experienced declines of several percent each. In particular, large index component Apple was hampered by the news of Chinese government employees to be restricted from using iPhones, as well as uncertainty over the potential popularity of the new iPhone models assumed to be rolled out next week. Real estate also fell back by a percent, in keeping with higher interest rates. 

Economic Update 9-05-2023 

• Economic data for the week included a revision downward for U.S. Q2 GDP, as well as improved but still negative ISM manufacturing. Housing results were generally positive, from the standpoint of home prices and pending sales. Labor market data was mixed, with continued signs of slowing, but remaining decent. 
• Global equities experienced gains, with U.S. stocks outperforming most foreign with benign economic, inflation, and interest rate news. Bonds rose along with a pullback in interest rates. Commodities were led higher by crude oil and industrial metals.

U.S. stocks started off well last week, particularly Tue. as job openings declined significantly (presumably lowering the probability of another Fed rate hike). The downward revision of Q2 GDP on Wed. also pointed to lowered likelihood of a hike, at least relative to a revision upward. Later in the week, the employment situation report reaction was mixed, with signs of labor slowing a positive in terms of keeping Fed policy where it is, but the sharply higher unemployment rate again raised some recession concerns. 

By sector, cyclicals broadly gained, led by technology, materials, energy, and consumer discretionary, each with returns of 3-4% on the week. Defensive industries utilities and consumer staples lagged with declines. Real estate also rose over a percent for the week. 

Economic Update 8-28-2023 

• Economic data for the week included a decline in durable goods orders, while housing data was mixed, with a drop in existing home sales offset by a rise in new home sales. 
• Equities rose globally as economic growth continued to stay non-negative, along with hopes for an eventual peak in interest rates. Bonds fared positively in the U.S. as yields fell back from prior-week highs. Commodities gained due to specific supply/demand dynamics and continued waning recession fears. 

U.S. stocks gained on the week, with mixed economic results and subtle positives, such as UPS workers approving a new 5-year labor deal, although autoworkers have yet to do the same. Positive market response to Fed Chair Powell’s non-controversial opening comments to the Fed’s Jackson Hole conference also helped sentiment. For now, the financial market response seems to continue to be all about yields. By sector, technology led the way, up over 2% (helped by NVIDIA’s results), followed by gains in consumer discretionary and communications; laggards included energy and consumer staples. Real estate also gained three-quarters of a percent for the week. 

Economic Update 8-21-2023 

• Economic releases for the week included the index of leading economic indicators continuing its long-running decline. However, retail sales and industrial production surpassed expectations on the upside. Housing data was mixed, as were several regional manufacturing surveys. 
• Stocks saw negative returns globally, with interest rates rising and concerns over the Chinese economy dominating sentiment. Bonds declined due to the direct impact of those rising yields. Commodities fell due to currency effects and demand concerns in oil and metals. 

U.S. stocks fell back for the third straight week. Domestic economic data continued at a mixed to decent growth rate; however, the FOMC minutes soured the mood with some officials hinting at further rate hikes potentially being necessary, and negative economic news from China also eroded sentiment. 

Every domestic sector lost ground, led by consumer discretionary down over -4% (with several members down, but mostly Tesla), followed by a decline in communications; on the other hand, energy, technology, and typically defensive health care and utilities suffered the fewest losses. Real estate also declined over -3% along with higher interest rates across the board. 

Economic Update 8-14-2023 

• Economic data for the week included consumer price inflation coming in at a continued decelerated pace, as were producer prices to a slightly lesser degree. Jobless claims rose modestly, with no major recent change. 
• Equities were mixed to lower last week, as interest rates rose and summer trading volumes remained low. Bonds fell back as well, due to the duration impact of rates. Commodities were mixed, with oil prices inching up slightly in a continuation of tighter supply conditions. 

U.S. stocks were mixed during the week, with lighter summer volumes coming along with the contrasting news of flatter inflation coupled with higher interest rates. By sector, energy gained over 3%, followed by health care, which was helped by drug-related news, with defensives generally faring better than cyclicals. Technology fell back nearly -3%, bucking recent strong trends. Financials were mixed as well, as several smaller banks received credit downgrades, which affected the small cap value market specifically. 

Economic Update 7-18-2023 

• Economic data for the week included producer and consumer price inflation continuing to decelerate—and even more so than expectations. Consumer sentiment also improved to the highest point in several years. 
• Global equities gained last week on the back of the improving U.S. inflation data. Bonds also gained along with the retreat in interest rates. Commodities rose with help from a weaker dollar. 

In the midst of slower summer volume, U.S. stocks gained last week, as falling consumer and producer inflation boosted investor spirits. The key factor, of course, is the impact on the economy, as well as the lower probability of the Fed’s continued hawkish rate hike path. Every sector ended in the positive last week, with communications and consumer discretionary leading the way, and energy and consumer staples coming up in the rear, with lesser gains. Real estate fared positively, up nearly 3%, as interest rates fell back. Earnings season began Friday, with several large banks showing mixed results for the quarter. 

Economic Update 7-10-2023 

• In a holiday-shortened week, economic releases included the mixed results of ISM manufacturing falling further into contraction, while ISM services rose further into expansion. The employment situation report showed positive jobs growth, but at a slower rate than expected, to cap a week of mixed labor data generally. 
• Equities fell globally last week, with expectations for more hawkish central bank policy and associated higher interest rates for longer, following not-terrible economic data. Bonds fell back along with higher assumed rates. Commodities were up slightly, led by production cuts in crude oil that boosted prices. 

U.S. stocks fell back generally last week, as decent economic news continued to perpetuate an assumed hawkish Fed policy lasting longer than expected, with further rate hikes. Stocks declined sharply on Thurs. specifically as strong labor market data (ADP and claims) highlighted these expectations. This was particularly true in light of somewhat hawkish Fed minutes from June, where further hikes were debated to a greater degree than was previously assumed. Nearly every sector was down for the week, led by health care, materials, and technology. Health care appeared to be negatively affected by disappointing trial results for a new lung cancer drug from AstraZeneca. Utilities and communications suffered least, with minimal changes for the week. Real estate gained a fraction of a percent, interestingly, despite a rise in interest rates.  

Economic Update 1-30-2023 

• Economic data for the week included U.S. GDP coming in for Q4 at a stronger pace than expected, in addition to positive reports for durable goods orders, new home sales, and consumer sentiment.
• Global stocks rose last week, with the U.S. leading the way, upon rising hopes for the economy achieving a soft landing and inflation easing. Bonds were little changed on the week. Commodities were mixed, with both crude oil and natural gas prices falling due to higher supply pressures.

U.S. stocks were mixed last week, with offsetting weaker economic reports and improved producer inflation readings. Sentiment mid-week took a turn downhill due to lower retail sales and industrial production numbers, as well as a large layoff announcement from Microsoft and Google. Thus far, layoff announcements have been concentrated in the tech industry, but markets appear to be awaiting a broader spread. Labor market erosion seems to be one of the key factors the Fed is anticipating in finding a fed funds rate peak. Sector results were oddly mixed, with communications (mostly Alphabet/Google), technology, and energy leading the way; industrials fared worst, along with normally defensive consumer staples and utilities. Real estate also fell back by nearly a percent.

Economic Update 10-24-2022

• Economic data for the week included a rise in industrial production, mixed regional manufacturing indexes, and a variety of weaker housing sales and sentiment reports. The index of leading economic indicators continues to lean towards a recession in coming months.
• U.S. equity markets saw sharp gains last week, due to stronger earnings and rising hopes for a Fed potentially slowing down on rate hikes, with foreign stocks also positive. Bonds fell back due to still-rising long-term yields. Commodities were mixed.

U.S. stocks saw gains last week with corporate earnings reports coming in better than expected. Additionally, a large batch of options expiring by the end of the week added to volatility. While comments from Fed members earlier in the week pointed to ongoing hawkishness, these were talked back later in the week with possible indications the Fed may slow or pause hikes pause early in 2023 to assess their impact thus far. Of course, such Fed comments aren’t made in a vacuum, and tend to be carefully worded when they are shared. Financial markets took this as a positive sign for better clarity on long-term yields. Every sector ended the week in the positive, led by energy stocks up 8%, followed by materials and technology. Real estate rose nearly 3% despite higher interest rates.

Earnings season for Q3 has begun, with several large firms in the financial sector having already reported. So far, rising loss provisions (a discretionary earnings item to a large degree) in expectation for recession have resulted in lowered earnings in that sector. Per FactSet, 20% of S&P members have now reported, with another half of the index reporting this coming week. Expectations have become more variable, with 115% earnings growth in energy barbelled by double-digit declines in financials, materials, and communications. As a whole, S&P 500 estimates for Q3 have fallen by a percent, but remain a positive 1.5% on a year-over-year basis, although nearly three-quarters of firms have surprised positively on an earnings and revenue basis. For the full 2022 calendar year, earnings growth is expected to be 6-7%, and rising to 7-8% for 2023. The current 12-month forward P/E is 15.6, just below the 10-year average, and right around the long-term average number.

Economic Update 9-12-2022

• On a holiday-shortened week, economic data for the week included the ISM services index strengthening, and mixed results for jobless claims.

• Global equity markets gained last week, as central bank actions and member comments solidified a commitment to fighting inflation without overly damaging the global economy, in addition to inflation pressures themselves cooling. Bonds were mixed, with treasuries down due to higher rates, and high yield seeing gains. Commodities were mixed, with energy falling back due to natural gas prices, while crude oil was little changed.

U.S. stocks gained ground last week, in a reversal of recent negativity, led by lower energy prices and well-accepted Fed comments about the ability to achieve a soft landing. Every sector was in positive territory, led by most cyclical consumer discretionary and materials, each up over 5%. Energy lagged, up less than a percent. Real estate also gained several percent, despite higher longer-term interest rates, which have been a headwind for the group.

Foreign stocks came in a bit behind U.S. stocks, with Europe and the U.K. several percent higher, while gains in Japan and emerging markets were more tempered. More solidified plans by several European nations (such as household energy cost caps in the U.K.) in handling the energy crisis resulting from gas shortages appeared to improve sentiment. The magnitude of some fiscal aid is approaching or exceeding that of the Covid response. The ECB raised interest rates by 0.75% on Thurs., which, coupled with hawkish language, has raised expectations for further hikes later in the year. Chinese producer price inflation fell unexpectedly, which helped global sentiment later in the week.

• Economic news for the week included the Federal Reserve raising interest rates sharply in their fight with inflation. Data was mixed, with the index of leading economic indicators and retail sales softer, while industrial production improved. Producer prices remained high, but showed some deceleration. Housing starts and sentiment continued to decline, not helped by rising mortgage interest rates.
• Global equity markets responded negatively to persistent worries over high inflation, rate hikes, and rising recession risks. Bonds fell back on higher yields globally, and pressure on credit. Commodities fell broadly with a pullback in crude oil and natural gas prices.

Fed Note:

The Federal Reserve Open Market Committee continued its aggressive tightening pace in the June meeting, by raising the key fed funds interest rate today by 0.75%—to a new range of 1.50-1.75%. This was the largest single meeting hike since 1994, and featured one dissenting vote (by a member favoring 0.50%). Why 0.75% and not 0.50%? It appeared the most recent consumer price index reading (still persisting around peak levels) and longer-term inflation expectations in the recent Univ. of Michigan consumer sentiment survey in recent days may have been catalysts for the stronger message and front-loading of hikes from later to earlier meetings....

Economic Update 6-13-2022

• Economic data for the week included consumer price inflation coming in high in keeping with expectations. Consumer sentiment remains challenged, at its lowest levels in decades, due to high inflationary pressures, notably with gasoline. Jobless claims were little changed, when adjusted for seasonal effects.
• Global equity markets fell back last week, as high inflation reports and poor consumer sentiment dampened risk-taking. However, emerging market stocks fared better as pandemic conditions in China appear to be improving. Bond markets fell back again with interest rates rising across the board. Commodities were mixed overall, but oil and natural gas prices continued to move higher.

Economic Update 6-06-2022

• Economic data for the holiday-shortened week included a rise in manufacturing sentiment and small drop in services sentiment, despite both remaining solidly expansionary. House prices continued to increase at a dramatic pace. The May employment situation report outpaced expectations, although results were not as strong as in recent months.
• Global equity markets fell back from a steep recovery the prior week, except for emerging markets, which gained ground as Chinese lockdowns eased. Bond prices declined as the result of higher treasury interest yields. Commodities were mixed, with higher energy prices offsetting a pullback in grains.

Economic Update 5-30-2022

• Economic data for the week included a slight downward revision in first quarter GDP, positive durable goods orders, along with weaker new home sales data and consumer sentiment.
• Global equity markets rose broadly last week, with U.S. stocks outperforming foreign. Bonds also fared positively, with interest rates pulling back upon a possible peaking in inflationary pressures. Commodities rose due to gains in crude oil and natural gas.

Economic Update 5-23-2022

• Economic data for the week included gains in retail sales and industrial production. On the other hand, regional manufacturing sentiment fell back, as did several housing metrics as activity slowed along with historically-low residential home inventories.
• Global equities were mixed on the week, with U.S. stocks down sharply once again, while foreign stocks gained ground. Bonds fared positively, with interest rates backing off of peaks. Commodities gained a bit, led by industrial metals rather than oil.

Economic Update 5-16-2022

• Economic data for the week included higher readings for the producer price and consumer price indexes—continuing a trend of higher inflation. However, import prices saw some relief. Continuing jobless claims fell further to very low levels, indicating labor market strength.
• Global markets fell back sharply last week, as volatility amidst a variety of geopolitical and financial crosswinds as well as a rising interest rate regime kept sentiment depressed. Bonds reversed course and saw gains as longer-term yields fell back from recent peaks. Commodities were mixed, with little change in oil prices, which remained high.

Economic Update 5-09-2022

• Economic data for the week included the Federal Reserve raising short-term interest rates by a half-percent, an amount not seen in over two decades. The employment situation report for April continued to show a strong improvement in jobs, while the unemployment rate remained unchanged at a tight level. ISM manufacturing and services fell back a bit, but remained solidly in expansionary territory.
• Global equity markets experienced another volatile week, with U.S. stocks outperforming foreign markets. Bonds also declined along with rising interest rates, prompted by the Fed policy move. Commodities ended higher, driven by tight crude oil supplies.

The Federal Reserve Open Market Committee turned more aggressive in this month’s meeting by raising the key fed funds interest rate by 0.50%—for the first time in over twenty years by that amount—to a new range of 0.75-1.00%. There were no dissents. This was in line with consensus estimates, steered by Fed member comments over the past few weeks that guided markets to anticipate this more hawkish outcome.

The formal statement language noted that economic activity edged down in Q1, although household and business spending remains strong, as are job gains. Inflation was described as remaining elevated, reflecting ongoing pandemic disruptions as well as higher energy prices, although broadened to other areas. Ukraine was also mentioned as an additional source of geopolitical uncertainty, and Covid lockdowns in China continuing to weigh on supply disruptions. In addition to today’s rate hike, ‘ongoing’ rate increases were seen as appropriate. Guidelines for balance sheet reduction were also outlined, set to begin in June at $47.5 bil./mo., ramping up to $95 bil./mo. after three months.

Based on CME data, formal probabilities of a 0.50% fed funds hike ticked up a few percentage points in recent days to just under 100%¹. In addition, a 0.75% rate increase is the highest expected outcome for June. The September level is predicted to reach 2.50-2.75% (around the Fed long-term neutral rate), and 3.00-3.25% by December, although that features more outcome dispersion on both sides. The latest period available, Jul. 2023, shows the highest probability being 3.50-3.75%, implying some slowing in the hiking pace by that time. Regardless, markets are predicting a much more aggressive Fed pace than we’ve been used to, although these probability markets are subject to rapid change.

The Fed’s evaluation metrics remain mixed, in terms of high inflation being offset by still decent, but decelerating economic growth fundamentals: ...

Economic Update 5-02-2022

• Economic data for the week included a surprisingly negative U.S. GDP result for the first quarter. Housing data was mixed, with slower sales, but home prices reached record highs. Consumer sentiment fell back a bit, but durable goods rose, and jobless claims remained positive, and near multi-decade lows.
• Global equity markets fell back sharply last week, due to mixed earnings reports, high commodity prices, slowing growth, and Ukraine concerns. Bonds were little changed in the U.S., but were negatively impacted abroad by an especially strong U.S. dollar. Commodities were mixed, with higher energy prices offsetting declines in metals.

Economic Update 4-25-2022

• Economic data for the week included declines in several national housing numbers, such as existing home sales and homebuilder sentiment; however, housing starts rose a bit. The index of leading economic indicators showed growth, but at a tempered pace from preceding months.
• Global equity markets fell back last week, in keeping with continued concerns over the ongoing Ukraine war as well as hawkish rhetoric from global central bankers. Bonds declined due to that same rhetoric, which pushed intermediate-term interest rates higher, and foreign bonds hurt by a stronger dollar. Commodities reversed trend last week, by falling back across the board, notably in energy.

Economic Update 4-18-2022

• Economic data for the week included gains in retail sales, as well as improvement in consumer sentiment, and continued healthy jobless claims. However, producer and consumer price inflation continued to come in at multi-decade high levels.
• In a holiday-shortened week, global equity markets were mixed to lower, as high inflation readings and negative sentiment about Ukraine weighed on risk-taking. Foreign outperformed the U.S. slightly due to a weaker dollar. Bonds continued to lose ground as interest rates climbed higher in keeping with high CPI and PPI readings. Commodities also gained, with crude oil and natural gas prices rising sharply.

Economic Update 4-11-2022

• In a light week for economic data, ISM services sentiment continued to show strength, while the minutes from the most recent March Fed meeting laid out a plan for faster rate hikes and a plan to allow for a balance sheet run-off of treasury and mortgage bonds.
• Equity markets in both the U.S. and abroad fell back last week, as interest rates ticked higher and economic concerns weighed on sentiment. Bonds suffered along with rising rates. Commodities were mixed, with gains in agriculture offset by less volatile energy prices last week.

Economic Update 4-04-2022

• Economic data for the week included minimal revisions to prior-quarter U.S. GDP growth, and a slight decline in the pace of still-positive ISM manufacturing sentiment. Housing prices continued to rise at a solid clip, while labor markets continue to demonstrate a recovery, notably in nonfarm payrolls for March.
• U.S. equity markets were little changed on net, and were outshined by gains in foreign markets. Bonds gained ground to end the quarter, as interest rates fell back from highs. Commodity prices fell back, led by energy, along with a potential increase in crude oil supply from government reserves.

Economic Update 3-28-2022

• Economic data for the week included a decline in durable goods orders and new home sales, and consumer sentiment fell to multi-year lows. However, jobless claims again reached multi-decade levels of strength.
• U.S. equity markets gained ground last week, despite a more hawkish Fed; foreign markets were mixed, based on the relative impacts of high energy prices and the war in Ukraine. Bonds fell back sharply, as hawkish central bank language caused interest rates to drift higher in a variety of maturities. Commodities continued to gain across the board along with supply shortages, notably in energy and metals, due to the war in Ukraine and associated Russian sanctions.

Economic Update 3-21-2022

• In economic news, the Federal Reserve raised interest rates for the first time in several years, by a quarter percent. In other data releases, retail sales and industrial production increased, as did housing starts, while jobless claims also came in better than expected. Producer prices continued their rise, and the index of leading economic indicators improved.
• Global equity markets rose last week with a tempering in commodity prices, a Fed that acted on the more tempered side, and rumors of progress in Ukraine-Russia peace talks. U.S. bonds fell back as interest rates ticked higher, along with hawkish Fed language. Commodities fell back due to concern over lower demand in China, due to Covid lockdowns.

The Federal Reserve Open Market Committee raised the key fed funds interest rate today by 0.25%, to a new range of 0.25-0.50%. This first hike in four years was as expected, with the Fed communicating their intention and amount fairly directly in recent weeks. However, at least until the Russian invasion of Ukraine, there was debate about whether the hike could be as high as 0.50%. In fact, there was one dissent in the committee decision, by Fed St. Louis President Bullard, who preferred the 0.50% hike....

Economic Update 3-14-2022

• Economic data for the week included the consumer price index rising to another multi-decade high, job openings continued to show strength, while jobless claims were little changed.
• Global equity markets lost ground again in keeping with the geopolitical and economic aftermath of the Ukraine conflict, although hopes for diplomacy resulted in a few positive days. Bonds fell back as well, with interest rates rising on net along with record inflation data. Commodities prices pulled back after a strong run since the start of the conflict.

Economic Update 3-07-2022

• Economic data for the week included a robust employment situation report, as well as other labor metrics, and improved manufacturing and construction activity.
• Global financial market sentiment continued to be driven by the Russia-Ukraine conflict, with U.S. and especially foreign stocks losing ground and staying in correction territory. Bonds were mixed, with higher-quality safe haven debt faring positively. Commodities experienced sharp gains, led by crude oil and grains—exports most affected by Russian and Ukrainian supplies.

Economic Update 2-28-2022

• Economic data for the week included a slight revision to prior-quarter GDP, a continued gain in house prices, and continued lower jobless claims. However, the Russian invasion of Ukraine dominated most other news.
• Global equity markets initially fell sharply last week, in the ramp-up to the Russian invasion, which had been brewing for weeks. However, stocks recovered after the military activity started and rumors of negotiations came. U.S. bonds started strong but fell back as interest rates ticked higher along with a return to inflation worries. Commodities gained across the board, notably in energy and agriculture, due Russian and Ukrainian-specific supply concerns.

A variety of conflicts involving major world powers have tended to historically raise short-term volatility in global financial assets. However, market damage has tended to be short-lived, as in the magnitude of a typical market correction (-10% or a bit more). One has currently been already underway since January, mostly due to interest rate fears, but also the probability of Russian military action in the Ukraine. Markets have reacted worse (such as -20% bear market-type declines) during broader regional conflicts, such as World War II or the Israel/Arab war in 1973. In the majority of cases, though, recoveries have also been relatively swift, and there has not been as much direct long-term economic impact as one might fear...

Economic Update 2-22-2022

• Economic data for the week included retail sales that came in higher than expected, as well as gains in industrial production, mixed regional manufacturing sentiment and housing metrics, and a slight pullback in the index of leading indicators.
• U.S. and foreign equity markets fell back last week, as tensions over Russia and Ukraine wavered (generally rising), in addition to continued strong U.S. inflation rhetoric. Bonds were mixed, with yields little changed, but credit spreads widened. Commodities were also mixed, with gains in metals offset by a pullback in oil prices by several percent.

Economic Update 2-07-2022

• Economic data for the week included a much stronger than expected employment situation report for January, as well as a pullback in the ISM manufacturing and services indexes, although the two still lie solidly in expansion.
• Global equity markets bounced back last week, with decent economic data and some improvement in the Covid caseload. Bonds fell back across the board, as interest rates continued to tick higher, along with the consensus opinion that central banks will be raising rates through 2020. Commodities gained ground again last week, led by crude oil prices, with high demand continuing to surpass more limited supply.

Economic Update 1-31-2022

• Economic data for the week included the Fed signaling upcoming rate hikes, a stronger-than-expected GDP growth report for Q4, and robust housing data, but a weaker durable goods report.
• U.S. equity markets ended mixed to higher in a volatile trading week, with large cap stocks outperforming small caps. Foreign stocks generally were negative, in keeping with a stronger dollar. Bonds fell back broadly along with higher interest rates following a hawkish Federal Reserve. Commodities gained, mostly in the energy sector—particularly due to weather, Ukraine, and market technicals in natural gas.

Fed Note:

The Federal Reserve Open Market Committee made no changes in interest rates today, as expected, staying with the target of 0.00-0.25%. But, times are changing.

The formal statement language was significantly simplified from December, that economic activity and employment have ‘continued to strengthen’, but also acknowledged the sharp recent rise in Covid cases on particular sectors. High inflation was attributed to ongoing ‘supply and demand imbalances’. However, the FOMC expects that it will ‘soon be appropriate’ to raise interest rates. The tapering off of treasury and mortgage-backed bond purchases was ramped up, scheduled to end in ‘early March’....

Economic Update 1-24-2022

• Economic data for the holiday-shortened week included mixed regional manufacturing results and housing data, higher jobless claims, but continued gains in the index of leading indicators.
• U.S. equity markets, especially the Nasdaq-heavy group of technology stocks, fell back near or into correction territory. Foreign stocks fared slightly better than U.S., although also in the negative. Bonds were mixed, based on risk level. Commodities gained a bit on net, along with continued tight supplies in crude oil markets.

Economic Update 1-18-2022

• Economic data for the week included continued historically-strong producer and consumer inflation readings, while retail sales came in weaker than expected.
• U.S. equity markets fell back last week, as investor continued to digest tighter monetary policy and the impact of the Covid omicron variant. Foreign stocks fared a bit better, due to a weaker dollar. Bonds were mixed, with lower-rated bonds outpacing investment-grade, with yields moving slightly higher. Commodities gained in keeping with a weaker dollar and rising crude oil prices.

Economic Update 1-10-2022

• Economic data for the week included a disappointment in December nonfarm payrolls, although the unemployment rate continued to improve. ISM manufacturing and services both fell back for the month, but remained solidly in expansion. Minutes from the Dec. Fed meeting showed a more hawkish tone than did the original statement released at the time.
• U.S. equity markets fell back along with higher yields, hawkish Fed meeting minutes, and higher commodity prices. Foreign stocks fared better, with mixed results. Bonds fell back sharply, as a result of higher long-term interest rates. Commodities gained, due to a geopolitical-based spike in energy prices.

Economic Update 1-3-2022

• For the final week of 2021, sparse economic data included a continued rise in national home prices, although pending sales fell back. Jobless claims continued to show downward improvement.
• Global equity markets ended the year on a positive note last week. Bonds were mixed, as interest rates were little changed. Commodities gained more ground, with help from a weaker dollar and hopes for continued demand recovery.

Economic Update 12-27-2021

• Economic data during the holiday week included a slight revision upward for Q3 U.S. GDP, and a slight improvement in consumer confidence. Durable goods orders and housing metrics were mixed.
• Global equity markets gained broadly last week, as fear of the Covid omicron variant’s severity seemed to subside a bit. Bonds were mixed to lower along with higher interest rates. Commodities also fared well, particularly in oil and metals, where the demand outlook was again viewed more positively.

Economic Update 12-20-2021

• Economic data for the week included the Federal Reserve announcing a faster pace in the tapering off of bond purchases, reflecting stronger growth and inflation pressures, as seen by last week’s high PPI number. Retail sales and industrial production rose, while several regional manufacturing indexes were mixed. Housing metrics also continued to improve.
• Global equity markets fell as fears of the omicron variant and Fed tightening intensified toward the end of the week. Bonds fared well with investors avoiding risk, which pushed long-term rates lower. Commodities were mixed, with gains in metals offset by declines in energy.

Economic Update 12-13-2021

• In a lighter week for economic data, releases included consumer price inflation reaching a 40-year high, while jobs statistics continued to show improvement.
• Global equity markets rose with waning concern over the severity of the Covid omicron variant, and its potential impacts on economic growth. Bonds were mixed, with high-grade debt falling back due to rising rates, while bonds of lower credit quality fared positively. Commodities gained as crude oil prices bounced back strongly.

Economic Update 12-06-2021

• Economic data for the week included stronger manufacturing data and higher home prices, while consumer sentiment fell back a bit. The employment situation report came in far weaker than expected on a headline basis, although other data appeared more robust.
• U.S. equity markets fell back last week upon the Federal Reserve’s evolving opinion of inflation and the uncertainty surrounding the new Covid omicron variant; foreign stocks, however, fared better. Bonds gained ground in keeping with investors moving away from risky assets. Commodities lost ground, with the prices of crude oil and natural gas continuing to fall on demand concerns.

Economic Update 8-02-2021

• Economic data for the week included Q2 GDP growth that came in robust, but below market expectations. Housing metrics were mixed, with strong prices but weaker sales. Consumer confidence continued to improve slightly.
• U.S. equity markets were mixed, as large caps lost ground but small caps gained. Foreign stocks were similarly mixed, with emerging markets were pulled down by volatility in certain Chinese sectors. Bonds gained slightly as interest rates continued to pull back. Commodities were helped from a weaker dollar, particularly in energy and industrial metals.

Economic Update 6-08-2020

• Economic data released last week continued to show broad shutdown-based weakness over the past several months, in manufacturing, services, construction, and employment. However, some signs of improvement are being seen on the margin, which have been taken positively by financial markets.
• U.S. equity markets gained with signs of economic recovery and a strong jobs report later in the week; foreign markets moved higher to an even greater degree. Bonds lagged with interest rates ticking higher on this same strength. Commodities rose with another strong recovery in crude oil, as producing nations discussed further supply cuts and demand is up.

Economic Update 6-01-2020

• On a shortened holiday week, economic data continued its lackluster trend, now reporting the well-known weakness of April and May in many industries. Included were weaker numbers for durable goods, jobless claims, and pending home sales. Consumer sentiment and housing prices were mixed.
• Global equity markets gained with optimism over lockdowns easing and a slow return to normalized activity. Foreign stocks outperformed U.S., helped by a weaker dollar. Bonds gained upon lower interest rates, and tighter credit spreads. Commodities gained along with hopes for economic recovery, led by higher crude oil prices—which have come a long way in recent weeks.