High-yield investors put off by today’s narrow spreads could be missing out.
There is a general belief that there are four big indicators that the NBER Business Cycle Dating Committee weighs heavily in their cycle identification process. This commentary focuses on one of those indicators, nonfarm employment. August saw a 142,000 increase in total nonfarm payrolls and the unemployment fell to 4.2%.
The Institute of Supply Management (ISM) has released its August services purchasing managers' index (PMI). The headline composite index is at 51.5, slightly better than the forecast. The latest reading moves the index back into expansion territory for 48th time in the past 50 months.
In the week ending August 31st, initial jobless claims were at a seasonally adjusted level of 227,000, falling to a two-month low. This represents a decrease of 5,000 from the previous week's figure and is better than the 231,000 economists were expecting.
We’ve always admired the great artistry of David Byrne from the Band Talking Heads. My favorite song of theirs is “Once in a Lifetime.” We think this song can tell our readers a great deal about how to look at our portfolio as we navigate an expensive and maniacal S&P 500 Index environment.
The latest job openings and labor turnover summary (JOLTS) report showed that job openings slid in July, reflecting cooling hiring. Vacancies decreased to 7.673 million in July from June's downwardly revised level of 7.910 million. The latest reading was below the expected 8.090 million vacancies.
A soft landing for the U.S. economy still appears to be the most likely outcome.
With his Jackson Hole speech, Federal Reserve Chair Jerome Powell all but promised rate cuts were coming. That’s cool. But it is why that matters.
Here is the latest update of a popular market valuation method, Price-to-Earnings (P/E) ratio, using the most recent Standard & Poor's "as reported" earnings and earnings estimates, and the index monthly average of daily closes for the past month. The latest trailing twelve months (TTM) P/E ratio is 27.2 and the latest P/E10 ratio is 34.9.
The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) inched up to 47.2 in August but remains in contraction territory for a fifth straight month. The index has now contracted for 21 of the past 22 months. The latest reading was worse than the forecast of 47.5.
The August S&P Global US Manufacturing PMI™ fell to 47.9 in August from 49.6 in July, indicating a modest deterioration in business conditions for a second straight month. The latest reading was just below the forecasted reading of 48.0 and is the index's lowest level of the year.
Seven of our eight indexes on our world watch list have posted gains through August 30th, 2024. The U.S.'s S&P 500 finished in the top spot with a year-to-date gain of 19.09%. Tokyo's Nikkei 225 finished in second with a year-to-date gain of 15.49% while India's BSE SENSEX finished in third with a year-to-date gain of 14.57%.
The US economic data released in early August not only triggered a brief, but dramatic episode of financial-market volatility. It also fueled an abnormal degree of instability in forecasts by leading Wall Street economists, suggesting that they, like the Federal Reserve, may have lost their strategic bearings.
Personal income (excluding transfer receipts) rose 0.32% in July and is up 4.1% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, real personal income (excluding transfer receipts) was up 0.16% month-over-month and up 1.6% year-over-year.
The latest Chicago Purchasing Manager's Index (Chicago Business Barometer) edged up to 46.1 in August from 45.3 in July. The latest reading is better than the 45.0 forecast but keeps the index in contraction territory for a ninth straight month.
With the release of July's report on personal incomes and outlays, we can now take a closer look at "real" disposable personal income per capita. At two decimal places, the nominal 0.21% month-over-month change in disposable income comes to 0.06% when we adjust for inflation. The year-over-year metrics are 3.09% nominal and 0.58% real.
The second estimate for Q2 GDP came in at 2.95%, an acceleration from 1.41% for the Q1 final estimate. With a per-capita adjustment, the headline number is lower at 2.48%, a pickup from 0.95% for the Q1 headline number.
Real gross domestic product (GDP) is comprised of four major subcomponents. In the Q2 GDP second estimate, three of the four components made positive contributions.
Is the Japanese yen carry trade back on? Tough question. We think it is, now that the Bank of Japan has toned down its hawkish rhetoric. More on that later. Still, even if we are wrong, the reality is that the market will be talking about the violent ructions of August 2024 for the rest of our careers.
The National Association of Realtors® (NAR)unexpectedly fell 5.5% in July to 70.2, its lowest level in history. Pending home sales were expected to inch up 0.2% from the previous month. The index is down 8.5% from one year ago.
The Conference Board's Consumer Confidence Index® hit a six-month high in August. The index rose to 103.3 this month from July's upwardly revised 101.9. This month's reading was better than expected, exceeding the 100.9 forecast.
Home prices continued to trend upwards in June as the benchmark 20-city index rose for a sixteenth consecutive month to a new all-time high. The S&P Case-Shiller Home Price Index revealed seasonally adjusted home prices for the 20-city index saw a 0.4% increase month-over-month (MoM) and a 6.4% increase year-over-year (YoY). After adjusting for inflation, the MoM was reduced to 0.1% and the YoY was reduced to 0.9%.
The Federal Housing Finance Agency (FHFA) house price index (HPI) unexpectedly declined to 424.5 in June, just below the all-time high of 424.8 from the previous month. U.S. house prices were down 0.1% from the previous month and are up 5.1% from one year ago. After adjusting for inflation, the real index was up 0.1% month-over-month and up 3.3% year-over-year.
The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for August. The latest general business activity index came in at -9.7, up from -17.5 last month. This marks the highest level for the index since January 2023 but is the 28th consecutive month the index has been in contraction territory.
That anthem was characteristic of the era. After two decades of economic frustration, free market policies had prompted a surge of growth and a bull market for stocks. The captains of industry were corporate raiders, who purchased companies, slashed expenses, pushed up prices and reaped outsized rewards.
Governments in the US and other developed countries, thanks to their central banks, may be deluded over how much debt they can pile up without significantly raising their costs to borrow.
Chair Jerome Powell said the time has come for the Federal Reserve to cut its key policy rate, affirming expectations that officials will begin lowering borrowing costs next month and making clear his intention to prevent further cooling in the labor market.
The July release for new home sales from the Census Bureau came in at a seasonally adjusted annual rate of 739,000 units, the highest level in fourteen months. The latest reading came in higher than the 624,000 forecast. New home sales are down 10.6% month-over-month from a revised rate of 668,000 in June and are up 5.6% from one year ago.
The latest Kansas City Fed Manufacturing Survey composite index did not decline as much in August following a sharper decline last month. The composite index came in at -3, up from -13 in July. Meanwhile, the future outlook increased to 8.
Emerging-market stocks are trading at the steepest discount to US equities since the Covid-19 panic in March 2020 as skittish investors look elsewhere for growth opportunities.
Existing home sales rose for the first time since February, ending a four-month skid. According to the data from the National Association of Realtors (NAR), existing home sales were up 1.3% from June, reaching a seasonally adjusted annual rate of 3.95 million units in July. This figure came in just above the expected 3.94 million. Existing home sales are down 2.5% compared to one year ago.
Chair Jerome Powell will usher in the next chapter in the Federal Reserve’s inflation battle on Friday, when he’s expected to set the table for an interest-rate cut while reassuring investors that policymakers can stave off a sharp economic slowdown.
Travel on all roads and streets decreased in June. The 12-month moving average was down 0.03% month-over-month and was up 1.40% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 0.10% MoM and up 0.78% YoY.
The current economic landscape is fraught with uncertainty, and the potential for higher inflation continues to pose a real threat to market stability.
Nominal retail sales in July were up 0.97% month-over-month (MoM) and up 2.66% year-over-year (YoY). However, after adjusting for inflation, real retail sales were up 0.81% MoM and down 0.25% YoY.
The Census Bureau's Advance Retail Sales Report for July revealed headline sales were up 1.0% last month. The latest reading was more than double the expected 0.4% monthly growth in consumer spending.
Builder confidence fell further in August as a lack of affordability and buyer hesitation continue to slow down the market. The National Association of Home Builders (NAHB) Housing Market Index (HMI) dropped to 39 this month, its lowest level of the year. The latest reading came was below the forecast of 43.
The latest Philadelphia Fed manufacturing index fell into negative territory for the first time since January as manufacturing activity softened overall. In August, the index dropped to -7.0 from 13.9 in July, coming in below the forecast of 5.4. The six-month outlook decreased to 15.4.
Manufacturing activity declined slightly in New York State, according to the Empire State Manufacturing August survey. The diffusion index for General Business Conditions was little changed at -4.7. The latest reading was better than the forecast of -5.9.
Over the past two years, we have seen some of the highest inflation rates since the second of the two recessions in the early 1980s. Over the past year we have slowly made our way back down but CPI remains elevated. Core CPI is currently sitting at a level last seen in the early 1990s, while headline CPI is near levels seen in the early 2010s.
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
Inflation cooled for a fourth straight month in July, dropping to its lowest level since March 2021. According to the Bureau of Labor Statistics, the headline figure for the Consumer Price Index fell to 2.9% year-over-year, lower than the expected 3.0% growth. Additionally, core CPI cooled to 3.2% as expected.
Wholesale inflation cooled more than expected last month. The producer price index for final demand increased 0.1% month-over-month (s.a.). On an annual basis, headline PPI decelerated from 2.7% in June to 2.2% in July.
The headline number for the NFIB Small Business Optimism Index jumped to 93.7 in July. Despite being the highest level since February 2022, the latest reading marks the 31st consecutive month the index has been below the series historical average of 97.9. The latest reading was higher than the forecast of 1.5.
When the Federal Reserve (Fed) cut rates in response to the COVID-19 pandemic, mortgage rates fell below 3% in 2021 and many households refinanced or obtained new loans.
A large majority of economists surveyed see only a quarter-point decrease in interest rates coming in September — a finding that’s at odds with calls from some large Wall Street banks for a jumbo cut at the next meeting.
The early August sell-off could represent just the market taking a breather after seven months of fantastic returns and could be right back on track, albeit with additional volatility.
Let's take a close look at July's employment report numbers on Full and Part-Time Employment. The latest data shows that 82.8% of total employed workers are full-time (35+ hours) and 17.2% of total employed workers are part-time (<35 hours).
It has been a tough earnings season for the technology industry, and markets more broadly.
Our monthly workforce analysis has been updated to include the latest employment report for July. The unemployment rate rose to 4.3%, its highest level since October 2021. Additionally, the number of new non-farm jobs (a relatively volatile number subject to extensive revisions) came in at 114K.
During each speculative run-up in asset prices – whether the dot-com bubble, the housing bubble, or more recently the rapid rise (and fall) of the stocks of electric vehicle companies – there’s typically a moment when Wall Street strategists, analysts, and investors go all-in on that theme.
The U.S. international trade in goods and services is published monthly by the Bureau of Economic Analysis with data going back to 1992 and details U.S. exports and imports of goods and services. In June, the trade deficit shrank 2.5% to -$73.11B. The latest reading was worse than the forecast of -$72.50B.
On the latest edition of Market Week in Review, Investment Strategist BeiChen Lin and ESG and Active Ownership Analyst Zoe Warganz discussed key takeaways from recent central bank meetings. They also provided an update on how U.S. small cap companies are performing during second-quarter earnings season.
Dollar cost averaging involves committing money to the stock market gradually, rather than all at once. This time spent out of the market leads to lower returns, but also to commensurately lower risk.
The July U.S. services purchasing managers' index (PMI) conducted by S&P Global came in at 55.0, just below the forecast of 56.0. The latest reading keeps the index in expansion territory for the 18th straight month.
Predicting a labor-market downturn was never an easy task. But unique post-pandemic dynamics are making it even harder for economists to determine whether a recent uptick in the unemployment rate is signaling trouble ahead.
Private equity has been in the news frequently in the last few weeks, and not in a good way.
Over the last decade, the general trend has been consistent: The rate of homeownership has struggled. The Census Bureau released its latest quarterly report for Q2 2024 showing the latest homeownership rate is at 65.6%, unchanged from Q1 2024 and remaining at its lowest rate in over two years.
When the Federal Reserve signals the likely path of monetary policy to investors this week, including an anticipated start to interest rate cuts in September, it can no longer be complacent about the labor market.
The economy and markets have emerged from the pandemic fundamentally changed. For equity investors, we believe this means a different opportunity set than the one that prevailed over the past decade and a half ― and one that favors alpha (excess return) over beta (market return).
US bonds rallied sharply as signs of a slowing economy and a recent stock-market rout fueled calls for quicker interest-rate cuts from the Federal Reserve, further juicing bets on a steeper yield curve.
Experts from the third-largest ETF manager by AUM make their predictions regarding active, retail, and inheritances.
Relatively high yields mean investors who have been focusing on short-term securities wouldn't need to sacrifice much yield if they chose MBS to help limit their reinvestment risk.
There’s a new-found religion in the US airline industry, and investors should be thrilled. It’s called discipline.
Portfolio Manager Daniel Siluk believes subsiding inflation and declining interest rates underpin a compelling argument for investors to reallocate funds away from money market strategies toward shorter-dated bonds.
As the U.S. evolved from a goods economy to a services economy, expansionary cycles more than doubled in length. But a recent resurgence in manufacturing may be taking us back to the future.
The barbarians are back at the gates. Morgan Stanley and Goldman Sachs Group Inc. are confident that their most important clients are about to get active after a long spell on the sidelines and help goose the long-awaited revival in investment banking fees.
Longer duration Treasuries have been mired in a bear market since 2020 but could finally start to see a reversal of fortune.
There’s more to artificial intelligence (AI) than the US tech giants. Equity investors can find overlooked opportunities in emerging-market companies.
This series has been updated to include the June release of the consumer price index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $50,634, down 7.1% from over 50 years ago. After adjusting for inflation, hourly earnings are below their all-time high from April 2020.
Life has been getting busier for investment bankers, but dealmakers aren’t cashing any checks yet. A stream of big-ticket merger and acquisition announcements this year bodes well for future revenue and bonuses, but no one gets paid until deals are completed. And that might not happen until late 2024 or even next year.
The oil company declared its traditional business was all but over. “The demand for fossil oil products will continue to decline,” it said in late 2020 as the pandemic slashed consumption. Even when Covid-19 is over, consumption wouldn’t “recover to previous levels.”
This chart series features an overlay of four major secular bear markets: the Crash of 1929, the Oil Embargo of 1973, the Tech Bubble, and the Financial Crisis. The numbers are through the March 28, 2024 close.
Federal Reserve Bank of New York President John Williams said that while inflation has cooled recently toward the Fed’s 2% target, policymakers are still some distance from their goal.
Economists and some Federal Reserve officials are increasingly on alert that pain could be on the horizon for American workers amid signs the labor market is losing steam.
The Generation X report released by Natixis Investment Managers included a check of investment sentiment and opportunities for advisors.
Retail trade sales in the U.S. are reported by distribution channel. For example, gasoline sales are reported through the gasoline stations distribution channel, although those gasoline stations’ sales also include everything else sold at gasoline station convenience stores, i.e., hot dogs, tobacco, sodas, gum, chips, coffee, etc.
The US trucking market, which has been in recession for more than a year now, is poised to recover … at some unknowable point in the future.
Remember when an inverted yield curve used to predict recessions? Here we are about two years removed from the Treasury yield curve moving into negative territory, and the U.S. economy has yet to move into recession territory. The economy’s resilience has certainly been a surprisingly welcome development and has left many a market participant wondering what happened.
In their mid-year outlook for global stocks, Head of Americas Equities Marc Pinto and Head of EMEA and Asia Pacific Equities Lucas Klein argue that while risks of an economic slowdown remain, the potential for unlocking new shareholder value is also strong.
Americans remain pessimistic about the state of the economy largely because the big jump in prices overwhelmingly outweighs the drop in inflation. Unfortunately, the current state of US politics means that more attention will be paid to assigning blame, rather than debating solutions, ahead of November’s presidential election.
Experienced real estate investors know that one of the primary fundamental measures of strength is occupancy rate.
The allure of China as a global manufacturing hub is unlikely to fade anytime soon.
When it comes to personalization, automation can be one of our most powerful tools. That might sound paradoxical, but it’s not.
There is a benefit to simplified language that can help consumers understand and engage with economic issues. Yet oversimplifying nuanced concepts to the point of inaccuracy only fosters miscommunication and misunderstanding.
The U.S. is clearly a leader in terms of regulatory enforcement. However, its regulators also have an important role to play in informing and shaping regulatory policy on an international scale. industry, this role is only likely to become more important.
This summer, countless bankers and financiers will get away to the Hamptons or vacation in Europe. And a handful will be traveling nearly every weekend — to play lacrosse.
A top risk for investors, elections may see a shift from centrist to more populist policy that could slow exports, raise inflation, and increase volatility in the global markets.
The needs of retirement plan sponsors and savers are changing, and advisors may want to consider a value proposition for the “next normal” in the shifting retirement landscape, according to Mike Dullaghan, Retirement Strategist at Franklin Templeton.
As of Q1 2024, the latest Fed balance sheet indicates that household net worth has risen 171% since reaching its 2009 low. However, when adjusted for inflation, household net worth has actually increased by only 86% since the 2009 trough.
COVID-19: Coronavirus Coverage
High-Yield Opportunity Persists, Despite Tight Spreads
High-yield investors put off by today’s narrow spreads could be missing out.
The Big Four Recession Indicators: August Employment
There is a general belief that there are four big indicators that the NBER Business Cycle Dating Committee weighs heavily in their cycle identification process. This commentary focuses on one of those indicators, nonfarm employment. August saw a 142,000 increase in total nonfarm payrolls and the unemployment fell to 4.2%.
ISM Services PMI Expanded for Second Straight Month in August
The Institute of Supply Management (ISM) has released its August services purchasing managers' index (PMI). The headline composite index is at 51.5, slightly better than the forecast. The latest reading moves the index back into expansion territory for 48th time in the past 50 months.
Unemployment Claims Down 5K, Better Than Expected
In the week ending August 31st, initial jobless claims were at a seasonally adjusted level of 227,000, falling to a two-month low. This represents a decrease of 5,000 from the previous week's figure and is better than the 231,000 economists were expecting.
Same as it Ever Was
We’ve always admired the great artistry of David Byrne from the Band Talking Heads. My favorite song of theirs is “Once in a Lifetime.” We think this song can tell our readers a great deal about how to look at our portfolio as we navigate an expensive and maniacal S&P 500 Index environment.
Job Openings Slid in July
The latest job openings and labor turnover summary (JOLTS) report showed that job openings slid in July, reflecting cooling hiring. Vacancies decreased to 7.673 million in July from June's downwardly revised level of 7.910 million. The latest reading was below the expected 8.090 million vacancies.
August Sees Markets Close Strong After Tough Start
A soft landing for the U.S. economy still appears to be the most likely outcome.
Navigating Earnings Season: Tailwinds of Tomorrow
With his Jackson Hole speech, Federal Reserve Chair Jerome Powell all but promised rate cuts were coming. That’s cool. But it is why that matters.
P/E10 and Market Valuation: August 2024
Here is the latest update of a popular market valuation method, Price-to-Earnings (P/E) ratio, using the most recent Standard & Poor's "as reported" earnings and earnings estimates, and the index monthly average of daily closes for the past month. The latest trailing twelve months (TTM) P/E ratio is 27.2 and the latest P/E10 ratio is 34.9.
ISM Manufacturing Index Contracts for 5th Straight Month
The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) inched up to 47.2 in August but remains in contraction territory for a fifth straight month. The index has now contracted for 21 of the past 22 months. The latest reading was worse than the forecast of 47.5.
S&P Global US Manufacturing PMI™: Lowest Level of 2024
The August S&P Global US Manufacturing PMI™ fell to 47.9 in August from 49.6 in July, indicating a modest deterioration in business conditions for a second straight month. The latest reading was just below the forecasted reading of 48.0 and is the index's lowest level of the year.
World Markets Watchlist: August 30, 2024
Seven of our eight indexes on our world watch list have posted gains through August 30th, 2024. The U.S.'s S&P 500 finished in the top spot with a year-to-date gain of 19.09%. Tokyo's Nikkei 225 finished in second with a year-to-date gain of 15.49% while India's BSE SENSEX finished in third with a year-to-date gain of 14.57%.
Analytical Volatility Is Worse than Market Whiplash
The US economic data released in early August not only triggered a brief, but dramatic episode of financial-market volatility. It also fueled an abnormal degree of instability in forecasts by leading Wall Street economists, suggesting that they, like the Federal Reserve, may have lost their strategic bearings.
The Big Four Recession Indicators: Real Personal Income Up 0.2% in July
Personal income (excluding transfer receipts) rose 0.32% in July and is up 4.1% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, real personal income (excluding transfer receipts) was up 0.16% month-over-month and up 1.6% year-over-year.
Chicago PMI Edged Higher in August
The latest Chicago Purchasing Manager's Index (Chicago Business Barometer) edged up to 46.1 in August from 45.3 in July. The latest reading is better than the 45.0 forecast but keeps the index in contraction territory for a ninth straight month.
Real Disposable Income Per Capita Up 0.1% in July
With the release of July's report on personal incomes and outlays, we can now take a closer look at "real" disposable personal income per capita. At two decimal places, the nominal 0.21% month-over-month change in disposable income comes to 0.06% when we adjust for inflation. The year-over-year metrics are 3.09% nominal and 0.58% real.
Q2 Second Estimate: GDP Per Capita versus GDP
The second estimate for Q2 GDP came in at 2.95%, an acceleration from 1.41% for the Q1 final estimate. With a per-capita adjustment, the headline number is lower at 2.48%, a pickup from 0.95% for the Q1 headline number.
An Inside Look at the Q2 2024 GDP Second Estimate
Real gross domestic product (GDP) is comprised of four major subcomponents. In the Q2 GDP second estimate, three of the four components made positive contributions.
There’s Another New Carry Trade in Town
Is the Japanese yen carry trade back on? Tough question. We think it is, now that the Bank of Japan has toned down its hawkish rhetoric. More on that later. Still, even if we are wrong, the reality is that the market will be talking about the violent ructions of August 2024 for the rest of our careers.
Pending Home Sales Unexpectedly Fall 5.5% in July to All-Time Low
The National Association of Realtors® (NAR)unexpectedly fell 5.5% in July to 70.2, its lowest level in history. Pending home sales were expected to inch up 0.2% from the previous month. The index is down 8.5% from one year ago.
Consumer Confidence Hits 6-Month High in August
The Conference Board's Consumer Confidence Index® hit a six-month high in August. The index rose to 103.3 this month from July's upwardly revised 101.9. This month's reading was better than expected, exceeding the 100.9 forecast.
S&P Case-Shiller Home Price Index: Hits New Record High in June
Home prices continued to trend upwards in June as the benchmark 20-city index rose for a sixteenth consecutive month to a new all-time high. The S&P Case-Shiller Home Price Index revealed seasonally adjusted home prices for the 20-city index saw a 0.4% increase month-over-month (MoM) and a 6.4% increase year-over-year (YoY). After adjusting for inflation, the MoM was reduced to 0.1% and the YoY was reduced to 0.9%.
FHFA House Price Index Unexpectedly Declined in June
The Federal Housing Finance Agency (FHFA) house price index (HPI) unexpectedly declined to 424.5 in June, just below the all-time high of 424.8 from the previous month. U.S. house prices were down 0.1% from the previous month and are up 5.1% from one year ago. After adjusting for inflation, the real index was up 0.1% month-over-month and up 3.3% year-over-year.
Dallas Fed Manufacturing: Business Activity Reaches 19-Month High in August
The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for August. The latest general business activity index came in at -9.7, up from -17.5 last month. This marks the highest level for the index since January 2023 but is the 28th consecutive month the index has been in contraction territory.
Getting to the Bottom of “Greedflation”
That anthem was characteristic of the era. After two decades of economic frustration, free market policies had prompted a surge of growth and a bull market for stocks. The captains of industry were corporate raiders, who purchased companies, slashed expenses, pushed up prices and reaped outsized rewards.
Countries Risk Overestimating Debt Capacity, Jackson Hole Paper Shows
Governments in the US and other developed countries, thanks to their central banks, may be deluded over how much debt they can pile up without significantly raising their costs to borrow.
Powell Says ‘Time Has Come’ for Fed to Cut Interest Rates
Chair Jerome Powell said the time has come for the Federal Reserve to cut its key policy rate, affirming expectations that officials will begin lowering borrowing costs next month and making clear his intention to prevent further cooling in the labor market.
New Home Sales Surge to 14-Month High
The July release for new home sales from the Census Bureau came in at a seasonally adjusted annual rate of 739,000 units, the highest level in fourteen months. The latest reading came in higher than the 624,000 forecast. New home sales are down 10.6% month-over-month from a revised rate of 668,000 in June and are up 5.6% from one year ago.
Kansas City Fed Manufacturing: Activity Declined Less in August
The latest Kansas City Fed Manufacturing Survey composite index did not decline as much in August following a sharper decline last month. The composite index came in at -3, up from -13 in July. Meanwhile, the future outlook increased to 8.
EM Stocks Getting Cheaper as Investors Cool to Analyst Optimism
Emerging-market stocks are trading at the steepest discount to US equities since the Covid-19 panic in March 2020 as skittish investors look elsewhere for growth opportunities.
Existing Home Sales Increase in July, Ending 4-Month Skid
Existing home sales rose for the first time since February, ending a four-month skid. According to the data from the National Association of Realtors (NAR), existing home sales were up 1.3% from June, reaching a seasonally adjusted annual rate of 3.95 million units in July. This figure came in just above the expected 3.94 million. Existing home sales are down 2.5% compared to one year ago.
Powell Confronts Policy Crossroads With All Eyes on Jackson Hole
Chair Jerome Powell will usher in the next chapter in the Federal Reserve’s inflation battle on Friday, when he’s expected to set the table for an interest-rate cut while reassuring investors that policymakers can stave off a sharp economic slowdown.
America's Driving Habits as of June 2024
Travel on all roads and streets decreased in June. The 12-month moving average was down 0.03% month-over-month and was up 1.40% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 0.10% MoM and up 0.78% YoY.
Inflation’s Hidden Risks: A Dive into the July CPI Report
The current economic landscape is fraught with uncertainty, and the potential for higher inflation continues to pose a real threat to market stability.
The Big Four Recession Indicators: Real Retail Sales Up 0.8% in July
Nominal retail sales in July were up 0.97% month-over-month (MoM) and up 2.66% year-over-year (YoY). However, after adjusting for inflation, real retail sales were up 0.81% MoM and down 0.25% YoY.
Retail Sales Up 1.0% in July, Better Than Expected
The Census Bureau's Advance Retail Sales Report for July revealed headline sales were up 1.0% last month. The latest reading was more than double the expected 0.4% monthly growth in consumer spending.
NAHB Housing Market Index: Builder Confidence Hits Lowest Level of the Year
Builder confidence fell further in August as a lack of affordability and buyer hesitation continue to slow down the market. The National Association of Home Builders (NAHB) Housing Market Index (HMI) dropped to 39 this month, its lowest level of the year. The latest reading came was below the forecast of 43.
Philly Fed Manufacturing Index: Activity Softens in August
The latest Philadelphia Fed manufacturing index fell into negative territory for the first time since January as manufacturing activity softened overall. In August, the index dropped to -7.0 from 13.9 in July, coming in below the forecast of 5.4. The six-month outlook decreased to 15.4.
Empire State Manufacturing Survey: Activity Declines Slightly in August
Manufacturing activity declined slightly in New York State, according to the Empire State Manufacturing August survey. The diffusion index for General Business Conditions was little changed at -4.7. The latest reading was better than the forecast of -5.9.
CPI Components: Breaking Down the July 2024 CPI
Over the past two years, we have seen some of the highest inflation rates since the second of the two recessions in the early 1980s. Over the past year we have slowly made our way back down but CPI remains elevated. Core CPI is currently sitting at a level last seen in the early 1990s, while headline CPI is near levels seen in the early 2010s.
Inside the Consumer Price Index: July 2024
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
Consumer Price Index: Inflation Cools to 2.9% in July
Inflation cooled for a fourth straight month in July, dropping to its lowest level since March 2021. According to the Bureau of Labor Statistics, the headline figure for the Consumer Price Index fell to 2.9% year-over-year, lower than the expected 3.0% growth. Additionally, core CPI cooled to 3.2% as expected.
Producer Price Index: Wholesale Inflation Cools in July
Wholesale inflation cooled more than expected last month. The producer price index for final demand increased 0.1% month-over-month (s.a.). On an annual basis, headline PPI decelerated from 2.7% in June to 2.2% in July.
NFIB Small Business Survey: Reaches Highest Level Since February 2022
The headline number for the NFIB Small Business Optimism Index jumped to 93.7 in July. Despite being the highest level since February 2022, the latest reading marks the 31st consecutive month the index has been below the series historical average of 97.9. The latest reading was higher than the forecast of 1.5.
Giving Some Context to Real Estate Concerns
When the Federal Reserve (Fed) cut rates in response to the COVID-19 pandemic, mortgage rates fell below 3% in 2021 and many households refinanced or obtained new loans.
Fed Seen Rejecting Calls for Jumbo Rate Cut in Economist Survey
A large majority of economists surveyed see only a quarter-point decrease in interest rates coming in September — a finding that’s at odds with calls from some large Wall Street banks for a jumbo cut at the next meeting.
The Windshield Is Bigger Than the Rearview Mirror for a Reason
The early August sell-off could represent just the market taking a breather after seven months of fantastic returns and could be right back on track, albeit with additional volatility.
A Closer Look at Full-time and Part-time Employment
Let's take a close look at July's employment report numbers on Full and Part-Time Employment. The latest data shows that 82.8% of total employed workers are full-time (35+ hours) and 17.2% of total employed workers are part-time (<35 hours).
Gig Economy Emerges as a Bright Spot Amid Gloomy Tech Earnings
It has been a tough earnings season for the technology industry, and markets more broadly.
U.S. Workforce Analysis: July 2024
Our monthly workforce analysis has been updated to include the latest employment report for July. The unemployment rate rose to 4.3%, its highest level since October 2021. Additionally, the number of new non-farm jobs (a relatively volatile number subject to extensive revisions) came in at 114K.
Going All In – The Bubble in Profit Expectations
During each speculative run-up in asset prices – whether the dot-com bubble, the housing bubble, or more recently the rapid rise (and fall) of the stocks of electric vehicle companies – there’s typically a moment when Wall Street strategists, analysts, and investors go all-in on that theme.
Trade Deficit Shrinks 2.5% in June
The U.S. international trade in goods and services is published monthly by the Bureau of Economic Analysis with data going back to 1992 and details U.S. exports and imports of goods and services. In June, the trade deficit shrank 2.5% to -$73.11B. The latest reading was worse than the forecast of -$72.50B.
Fed Signals Rate Cuts Could Begin in September
On the latest edition of Market Week in Review, Investment Strategist BeiChen Lin and ESG and Active Ownership Analyst Zoe Warganz discussed key takeaways from recent central bank meetings. They also provided an update on how U.S. small cap companies are performing during second-quarter earnings season.
Does Dollar Cost Averaging Affect Investment Results?
Dollar cost averaging involves committing money to the stock market gradually, rather than all at once. This time spent out of the market leads to lower returns, but also to commensurately lower risk.
S&P Global Services PMI: Expands for 18th Straight Month
The July U.S. services purchasing managers' index (PMI) conducted by S&P Global came in at 55.0, just below the forecast of 56.0. The latest reading keeps the index in expansion territory for the 18th straight month.
US Job Market’s Pandemic Unwind Puts Recession Signals to Test
Predicting a labor-market downturn was never an easy task. But unique post-pandemic dynamics are making it even harder for economists to determine whether a recent uptick in the unemployment rate is signaling trouble ahead.
Pension Funds Are Hooked on Private Equity, No Matter the Risks
Private equity has been in the news frequently in the last few weeks, and not in a good way.
Home Ownership Rate: 65.6% in Q2 2024
Over the last decade, the general trend has been consistent: The rate of homeownership has struggled. The Census Bureau released its latest quarterly report for Q2 2024 showing the latest homeownership rate is at 65.6%, unchanged from Q1 2024 and remaining at its lowest rate in over two years.
Big Business Signals to Fed It’s Either Rate Cuts or Job Cuts
When the Federal Reserve signals the likely path of monetary policy to investors this week, including an anticipated start to interest rate cuts in September, it can no longer be complacent about the labor market.
Equity Investing for a New Era: The Return of Alpha
The economy and markets have emerged from the pandemic fundamentally changed. For equity investors, we believe this means a different opportunity set than the one that prevailed over the past decade and a half ― and one that favors alpha (excess return) over beta (market return).
Treasuries Lead Global Bond Rally as Traders Bet Cuts Are Near
US bonds rallied sharply as signs of a slowing economy and a recent stock-market rout fueled calls for quicker interest-rate cuts from the Federal Reserve, further juicing bets on a steeper yield curve.
State Street: Active, Retail, Inheritances to Drive Next $10T in ETF Assets
Experts from the third-largest ETF manager by AUM make their predictions regarding active, retail, and inheritances.
Why to Consider Mortgage-Backed Securities Now
Relatively high yields mean investors who have been focusing on short-term securities wouldn't need to sacrifice much yield if they chose MBS to help limit their reinvestment risk.
Airfare War Is Ending Quickly as Carriers Retreat
There’s a new-found religion in the US airline industry, and investors should be thrilled. It’s called discipline.
Outpacing Money Markets: The Historical Yield Advantage of Short-Dated Bonds
Portfolio Manager Daniel Siluk believes subsiding inflation and declining interest rates underpin a compelling argument for investors to reallocate funds away from money market strategies toward shorter-dated bonds.
Third Quarter Equity Outlook
As the U.S. evolved from a goods economy to a services economy, expansionary cycles more than doubled in length. But a recent resurgence in manufacturing may be taking us back to the future.
Wall Street Senses the Barbarians Are Finally at the Gates
The barbarians are back at the gates. Morgan Stanley and Goldman Sachs Group Inc. are confident that their most important clients are about to get active after a long spell on the sidelines and help goose the long-awaited revival in investment banking fees.
Going Longer: Deeper Rotation Into Duration?
Longer duration Treasuries have been mired in a bear market since 2020 but could finally start to see a reversal of fortune.
Is AI a New Engine for Emerging-Market Equity Investors?
There’s more to artificial intelligence (AI) than the US tech giants. Equity investors can find overlooked opportunities in emerging-market companies.
Middle Class Hourly Wages as of June 2024
This series has been updated to include the June release of the consumer price index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $50,634, down 7.1% from over 50 years ago. After adjusting for inflation, hourly earnings are below their all-time high from April 2020.
M&A Is Back. Bonuses, Not So Much.
Life has been getting busier for investment bankers, but dealmakers aren’t cashing any checks yet. A stream of big-ticket merger and acquisition announcements this year bodes well for future revenue and bonuses, but no one gets paid until deals are completed. And that might not happen until late 2024 or even next year.
Another Green Bubble Is Deflating in Biofuels
The oil company declared its traditional business was all but over. “The demand for fossil oil products will continue to decline,” it said in late 2020 as the pandemic slashed consumption. Even when Covid-19 is over, consumption wouldn’t “recover to previous levels.”
The Four Bad Bear Recoveries: Where Is Today's Market?
This chart series features an overlay of four major secular bear markets: the Crash of 1929, the Oil Embargo of 1973, the Tech Bubble, and the Financial Crisis. The numbers are through the March 28, 2024 close.
Fed’s Williams Says Inflation Job Not Done Despite Progress
Federal Reserve Bank of New York President John Williams said that while inflation has cooled recently toward the Fed’s 2% target, policymakers are still some distance from their goal.
US Labor Market Shows Signs of Losing Steam, Putting the Fed on Alert
Economists and some Federal Reserve officials are increasingly on alert that pain could be on the horizon for American workers amid signs the labor market is losing steam.
Advisor Opportunities for Generation X
The Generation X report released by Natixis Investment Managers included a check of investment sentiment and opportunities for advisors.
Online Sales Continue to Grow, Unabated
Retail trade sales in the U.S. are reported by distribution channel. For example, gasoline sales are reported through the gasoline stations distribution channel, although those gasoline stations’ sales also include everything else sold at gasoline station convenience stores, i.e., hot dogs, tobacco, sodas, gum, chips, coffee, etc.
A Trucking Rebound Is Near. For Real This Time.
The US trucking market, which has been in recession for more than a year now, is poised to recover … at some unknowable point in the future.
Staking a “Claim” With Inverted Curves
Remember when an inverted yield curve used to predict recessions? Here we are about two years removed from the Treasury yield curve moving into negative territory, and the U.S. economy has yet to move into recession territory. The economy’s resilience has certainly been a surprisingly welcome development and has left many a market participant wondering what happened.
Equity Outlook: A Broadening of Opportunities
In their mid-year outlook for global stocks, Head of Americas Equities Marc Pinto and Head of EMEA and Asia Pacific Equities Lucas Klein argue that while risks of an economic slowdown remain, the potential for unlocking new shareholder value is also strong.
The Defining Economic Issue of the US Election
Americans remain pessimistic about the state of the economy largely because the big jump in prices overwhelmingly outweighs the drop in inflation. Unfortunately, the current state of US politics means that more attention will be paid to assigning blame, rather than debating solutions, ahead of November’s presidential election.
Tap Into High-Occupancy REITs With This ETF
Experienced real estate investors know that one of the primary fundamental measures of strength is occupancy rate.
The Rise of the China Plus One Strategy
The allure of China as a global manufacturing hub is unlikely to fade anytime soon.
Automation Supports Personalized Service
When it comes to personalization, automation can be one of our most powerful tools. That might sound paradoxical, but it’s not.
Inflation Redefined? The Gap Between Public Perception and Economic Reality
There is a benefit to simplified language that can help consumers understand and engage with economic issues. Yet oversimplifying nuanced concepts to the point of inaccuracy only fosters miscommunication and misunderstanding.
Why U.S. Regulators Must Lead the Global Fight
The U.S. is clearly a leader in terms of regulatory enforcement. However, its regulators also have an important role to play in informing and shaping regulatory policy on an international scale. industry, this role is only likely to become more important.
Wall Street Bankers Skip Hamptons Summer for Pro Lacrosse League
This summer, countless bankers and financiers will get away to the Hamptons or vacation in Europe. And a handful will be traveling nearly every weekend — to play lacrosse.
Election Risk Returns
A top risk for investors, elections may see a shift from centrist to more populist policy that could slow exports, raise inflation, and increase volatility in the global markets.
Navigating the Next Normal in the Retirement Industry
The needs of retirement plan sponsors and savers are changing, and advisors may want to consider a value proposition for the “next normal” in the shifting retirement landscape, according to Mike Dullaghan, Retirement Strategist at Franklin Templeton.
Household Net Worth Q1 2024: The "Real" Story
As of Q1 2024, the latest Fed balance sheet indicates that household net worth has risen 171% since reaching its 2009 low. However, when adjusted for inflation, household net worth has actually increased by only 86% since the 2009 trough.