• Buckle In

    Everyone’s Favorite Blame Game Manufacturing activity rebounded in March, with the ISM manufacturing index coming in at 55.3, ahead of the 54.2 print in February and economist estimates of 54.5. If you remember the Philly Fed Survey from a few weeks ago, it wasn’t clear what to expect from this report but most of the data pointed to stabilization of the manufacturing sector that’s been weakening since the fall last year. Components of the index were encouraging – new orders increased 1.9 points, production increased 1 point, and employment actually showed significant strength rising 5.2 points. The ISM services index, however, expanded at the slowest rate in 19 months, falling to 56.1 from 59.7…

  • The Inversion

    May Political Resolutions Trump all this Drama  The Mueller investigation against President Trump concluded that neither Trump nor his campaign conspired with the Russian government and Attorney General William Barr concluded the evidence wasn’t sufficient to establish that Trump committed a crime. While “Keep America Great” tweets from the White House flooded news cycles early this week, political drama was unfolding across the pond as the UK Parliament was considering Theresa May’s third Brexit vote, which was defeated on Friday. Apparently third time May not, in fact, be a charm. Britain was given until May 22 to leave the EU, but with the Brexit deal voted down, the new cut-off is April 12.  Moral…

  • Great Expectations (for Not So Great Growth)

    Accommodations  The Federal Reserve had its regular two-day meeting this week. The market was largely expecting the FOMC to keep policy unchanged but all eyes were on the economic outlook for this year. The Fed left policy rates unchanged and indicated no rate increases in 2019, which is lower than the two rate increases that were previously forecast. The Fed also expects to wind down the balance sheet reduction by September, which is sooner than the year-end timeline previously expected by the market.  Moral of the story: While this accommodative policy was the good news the market wanted to hear, it also comes in tandem with the Fed lowering its…

  • Wall Street’s Back (alright!)

    Finding the silver lining  After the dismal December retail sales report, investors have been awaiting the January numbers, which we saw on Monday this week. I’ll give you the bad news first. The December numbers were actually revised further downward to -1.6% (compared to the initial -1.2% number), which is the biggest drop in retail sales since September 2009 when we were clawing back from the GFC. Now the good news. Retail sales increased 0.2% in January, which is higher than expected, driven by sales for building materials and discretionary spending. Compared to January last year, retail sales actually increased 2.3%.  Moral of the story: January retail sales tend to be lower than those in December given…

  • The Worst Week of 2019

    The first shoe dropped…  Monday morning brought news that a trade deal with China was nearing, causing stocks to rally. However, given most investors believed a resolution to already be priced into the market, they took advantage of these elevated prices to cash in some of their gains, and this sell-off brought stocks right back down again. While the markets are already expecting a trade deal by the end of March, there is still a significant amount of uncertainty around the details and, therefore, true impact on the economy. Reaching a deal itself is important, but the bigger concern for the US (and others around the world) is going to be the…

  • All the Things, All at Once

    Growing, going, gone?  GDP for the 4th quarter of 2018 increased 2.6%, which was higher than what the market was expecting. Consumer spending grew at 2.8%, which is significantly slower than the 3.5%+ pace we saw earlier this year (remember the horrible retail sales data for December?). Growth in business investment surprised the market to the upside, rising 6.2%, while residential investment declined for the 4th straight quarter (more on this later). And as predicted by the crystal ball of the Philly Fed’s survey last week, the ISM Manufacturing Index came in below expectations and fell 2.4 points in February driven by a decrease in new orders, employment, and production. However, while we continue to see signs building for…

  • Meetings, Minutes, and Manufacturing

    Counting the minutes FOMC meeting minutes are issued three weeks after each meeting and help inform the market of the Fed’s thoughts on monetary policy changes (or lack thereof). The last Fed meeting indicated a big shift from further interest rate hikes to a pause on interest rate hikes, so the market has been waiting to fully understand the Fed’s thought process behind this more dovish outlook. The meeting minutes were generally optimistic due to the strengthening labor market and solid GDP while the key area of concern (appropriately so) was slowing global growth.  Moral of the story: The FOMC members seem to be in agreement about approaching future interest rate…

  • No way, not real

    #fakenews  Because of the government shutdown, we hadn’t received retail sales numbers from the Commerce Department until this week’s report that showed December retail sales plummeted 1.2%, printing the worst report since 2009. This number was a big surprise to economists who were expecting a 0.2% gain. The weakness was across all categories, including a 3.9% decline in online sales, which is a little strange when major online retailers, like Amazon, reported one of the best holiday seasons in years. This report was actually so bad that economists are crying #fakenews on this one and trying to point fingers at any rationale to prove this is a one-time anomaly –…

  • State of the Global Economy

    State of the Union This week we heard President Trump’s State of the Union address, during which he called for a bipartisan push for an infrastructure bill and lowered drug prices along with continued spending on defense. While spending $1.5 trillion on infrastructure over the next decade was part of Trump’s presidential campaign, the passing of an infrastructure bill seems unlikely without raising taxes to fund this level of spending. In terms of defense spending, the government is expected to spend around $716 billion in 2019.  Moral of the story: Depending on the ability for Congress to play nice and actually make things happen, there are winners and losers in…

  • Reassurance

    Fed speak  The Fed held its first policy meeting of the year this past week and let me tell you, the markets were ecstatic at what they heard. The FOMC voted unanimously to keep rates unchanged, which was the consensus expectation. The real game changer here was the clear messaging from Fed Chairman Jerome Powell after the policy meeting: the Fed intends to be patient and consider economic conditions as it determines future interest rate and liquidity moves. Stocks rallied in a big way on this reassurance.  Moral of the story: This is the second time the Fed has given us confidence that it won’t determine policy with a blind eye…