What Happens in Vegas…

The Great Inflection 

We’ve been waiting on a manufacturing recovery after trade war resolutions and it might finally be happening. The Philly Fed’s manufacturing index jumped to the highest level in three years this month with new orders seemingly driving a big part of the improvement. The six-month outlook measured by this index also increased for the fifth straight month. 

Moral of the story: The New York Fed’s manufacturing survey showed similar optimism. These two reports put together are usually considered to be an indication of the broader US national ISM manufacturing index, which showed early signs of improvement in January and I’d expect incremental strength again for February. 

Building Optimism 

The FOMC seems to be more optimistic about the prospects of the US economy than expected, based on their January meeting minutes. Their concerns as of January included tensions in the Middle East and coronavirus (now called COVID-19, doesn’t roll off the tongue quite as well) impacts. Even though there was limited information on COVID-19 during the Fed’s January meeting, Chairman Powell informed Congress last week that the committee was carefully monitoring the situation. The most exciting part, however, was the slight level of optimism about the business sector and inflation levels.

Moral of the story: All this slight optimism actually led the Fed to increase their expectations for 2020 GDP growth. That being said, this was prior to the impact of COVID-19 we’re already seeing on major companies like Apple. We’ll see if they’re feeling just as optimistic in their February meeting but significant COVID-19 impacts could prompt the Fed to consider cutting interest rates yet again this year. 

Fireworks 

ICYMI, Michael Bloomberg joined the Democratic debate stage for the first time this week in Sin City, and things got spicy as Super Tuesday loomed in the near future. Bloomberg got hit with attacks from most everyone on the stage and appeared unprepared for some of the harshest critique regarding NDAs signed by women (Bloomberg has since agreed to release three women from NDAs if they would like to speak publicly). Warren dominated the conversation with attacks on most everyone on the stage – her performance prompted a campaign raise of $1m during the debate and $2.8m throughout the day, showing some signs of revival after she had seemingly lost her momentum. Sanders seemed to come out of the battle unscathed while Biden appeared to be an afterthought – it doesn’t seem like his competition is worried about him too much anymore. Buttigieg and Klobuchar were at each other’s throats. 

Moral of the story: If the level of animosity was so high this week, I imagine the upcoming debate in Charleston will be even feistier. I’ll be here with a bowl of popcorn ready for the show. With Sanders at the top of the national polls (he also just won Nevada) and Bloomberg near the top of the polls for the key Super Tuesday states, Buttigieg and Klobuchar are fighting for the 15% threshold to win enough delegates to keep their campaigns running.