• Assuaging Concerns

    Persian Gulf Problems  CPI rose a full 0.1% in April as inflation was held in check largely due to a decline in gasoline prices. On Thursday, however, we got news that two oil tankers were attacked in the Strait of Hormuz, escalating fears of potential disruption in the supply of oil, and sending oil prices higher. So, we could see this put some upward pricing pressure on gasoline for the May CPI read. The annual increase fell to 2% from 2.1% last month, and is in line with the Fed’s 2% target.  Moral of the story: The biggest thing that seems to be driving inflation right now is rising rents, but aside from…

  • **cue ominous music**

    Same old, same old  Manufacturing data continue the downward trend that started last fall, which is nothing new at this point, but I mean not ideal. Manufacturing businesses grew at the slowest pace in two and half years (since the month before Trump was elected) in May because, ICYMI, we’re fighting with China. At least it seems like we’ve hit the pause button on the fight with Mexico.   Moral of the story: The ISM Manufacturing index is only 2.1 points away from falling into contractionary territory. China and Mexico are two of our three largest trade partners, so it can’t be a surprise that the manufacturing sector is feeling a little blue. …

  • Oy Vey

    GDP was revised…wait for it…downward  Remember the much stronger-than-expected initial GDP print we got for the first quarter? It was revised down to 3.1% from 3.2% (economists were slightly more pessimistic, ready for a revision down to 3%). The revisions of importance – business investment, inventories, and inflation were revised downward while exports were revised upward. Read: the weakness in consumer and corporate metrics remain.  Moral of the story: The strength in first quarter GDP is still being driven by temporary factors that could easily be reversed in the second quarter. Given the escalating trade tensions with China, I don’t see corporate profits, manufacturing, or business investment rebounding in the…

  • Fed up with this saga

    Fed Speak  The Fed’s latest meeting minutes were released this week and largely confirmed what we had assumed to be the situation – the FOMC members seemed to be on board with continued patience on future adjustments to interest rates. In terms of the direction of interest rates in the future, however, members seemed to be a little more divided. A few officials demonstrated support of higher rates pending continued economic expansion while others expressed concerns about the risk of low inflation. On this front, the committee will be meeting in Chicago in early June to discuss whether the 2% inflation target is appropriate but adjustments to policies aren’t expected until…

  • Sentiments Toward a Renewed Focus

    Jack of all trades… Trade drama has been making headlines for a while and things have escalated quickly over the last two weeks. We have had outstanding trade issues with various different major trade partners over the last few months. This week, Trump agreed to lift tariffs on metal imports from Canada and Mexico while postponing his decision to impose tariffs on automobiles from Japan, the European Union, and various other countries for six months. This leaves all the attention on China. Latest news on this front – these trade talks have come to a standstill. Oh good.  Moral of the story: Improving trade agreements was a large part of…

  • China, China, China

    One for you, one for you, one for everyone!  The latest Job Openings and Labor Turnover Survey (JOLTS) report showed we had 7.49 million job openings in March while there were only 5.8 million unemployed workers. This marks thirteen straight months where the number of job openings has exceeded the number of unemployed workers as companies are struggling to find the right type of people to fill these jobs. This is a massive opportunity that a previous stock pick (LRN) is addressing. Job openings saw big gains for transportation, warehousing, construction, and real estate while job openings fell slightly for the federal government.  Moral of the story: While the pace of hiring has slowed…

  • Magic Fountain Philosophies

    Solid & Steady  The Fed held its monthly policy meeting this week and decided to leave rates unchanged. Policy members pointed out that overall and core inflation have been recently declining (remember just last week we saw CPI decline to 1.7%) and running below the Fed’s 2% target even though the economy is growing at a steady rate. However, Fed officials believe this weakness in pricing will be “transient.” Moral of the story: Based on the upbeat commentary from the FOMC and their belief that inflation might return, the Fed effectively erased any hopes of a rate cut. Bad news is that markets were probably hoping to hear a tone…

  • LOL, JK

    LOL, JK. We got the initial read on first quarter GDP this week – while economists were forecasting a 2.3% growth rate, we actually saw GDP increase by 3.2% for the first quarter. What happened to all the data that was indicative of a slowdown in economic growth?! A surprise to the upside came from a 3.9% increase in local and state government spending, which had decreased by 1.3% in the fourth quarter. Two other factors that positively impacted GDP were increased inventories and trade. On the other hand, consumer spending only increased by 1.2%, which is the slowest rate of growth we’ve seen in a year, business fixed investment decelerated…

  • Rebounds & Earnings

    The March Continues into April The Philly Fed’s manufacturing index came in at 8.5 in April, falling from its March reading of 13.7 and coming in below economists’ expectations. This index was as high as 32.3 at the beginning of last year and has steadily marched downward. More notably, the future activity outlook fell to its lowest level since February 2016 (all this doesn’t make me feel too warm and fuzzy). Manufacturing has been a weakness in the economy lately driven by a stronger US dollar, weaker growth overseas (though Chinese economic data for first quarter came in ahead of expectations with an 8.5% jump in industrial production), and trade…

  • Inflation, where are you?

    Minutes Matter Remember the Fed meeting two weeks ago when they decided to keep interest rates unchanged and effectively hit pause on their tightening policies? We got to see the minutes from that meeting this week and their decision was driven by economic data indicating slower growth in the US, Brexit (the “will they, won’t they” drama continued this week with yet another extension), and of course can’t forget trade tensions with China. To my surprise, the FOMC also called out the lack of inflation in response to wage growth and pricing pressure from tariffs. While policy changes were indicative of a cautious stance toward the economy, some FOMC members refused to rule…