Market Update

MarketsThe stock market faces slower economic growth while central banks are trying to slow inflation, which has not subsided meaningfully. Q3 earnings growth estimates have dropped from 9.8% to 3.7% since June. Seven of 11 sectors are now expected to show YoY earnings declines. In periods of high inflation, earnings have historically peaked just two months prior to the start …

Market Update

MarketsInvestors have survived a bear market. They’ve survived the fastest pace of rate hikes in decades. Yet, one bad week, and doubt has crept back in. While inflation is improving, we have no idea where it will level off. We also have no idea of when the Fed will stop raising rates. The outlook is highly uncertain. Inflation is showing signs …

Market Update

The Jobs ReportThe employment report was shockingly strong. The economy added 528K jobs, and economists expected 258K. Leisure and hospitality, professional and business services, and health care saw the greatest job gains. Employment levels are back to Feb. 2020 levels, and we’ve recovered 22MM jobs in 2.5 years. Private sector employment is now 629K above the pre-pandemic level and government …

Market Update

General EconomyEconomic activity is slowing in the U.S. and Europe. The composite US purchasing managers index fell to 47.5 in July (from 52.3). The drop in services was the biggest fall since May 2020. The rising costs of gas, food, and rent are prompting consumers to spend more on essentials and pull back on discretionary services. Highlights Economists now put the …

Market Update

The EconomyConsumer sentiment is being driven by inflation and stocks but is worse than warranted. Consumer prices increased at an 8.6% annual rate in May, and many Americans are  now starting to forgo some purchases and outings. Consumers are also suffering through a reverse-wealth-effect as stock prices have  dropped and there is concern about home prices. The stock market is …

Market Update

EquitiesStocks had a great week. The market seemed to like Powell’s acknowledgement of the possibility of a recession, if only because it might mean less aggressive rate increases in the future. The market seems to be interpreting recent signs of slowing growth as a reason for the Fed to potentially be less aggressive. The thinking really seems to be that we …

Market Update

Bonds and the DollarMay was the first time in 10 months that corporate bonds had a positive return. Previously, higher inflation led to belief in a more aggressive Fed and that resulted in higher yields (lower bond prices). In May, investors seemed to decide that investment grade bonds offered good value. On Friday, the dollar rose. This was the result …

Market Update

InflationInflation is north of 8% and unemployment is 3.6%. The last time inflation went above 8% and unemployment went below 4% was 1951. The last time the U.S. saw a combination of high inflation and low unemployment like today’s was seven decades ago. That makes it particularly challenging for the Federal Reserve to curb inflation while avoiding a recession. Highlights …

Market Update

MarketsThe Fed is using tools to bring excess demand into better balance w/ constrained supply. It will be challenging to remove accommodation to get inflation under control while sustaining healthy labor market conditions. Some of the issues weighing heavier for the markets last week were: the Fed policy, Russia, China’s new lockdowns and growth slowing.Highlights Dow suffers longest losing streak …

Market Update

StocksWith ~69% of S&P 500 companies having reported (through Thursday of last week), Q1 earnings had grown by more than 10%.  In April, the DJIA was down 4.9%, S&P 500 was down 8.8%, and Nasdaq dropped 13.3%. These were the biggest monthly declines since March 2020 for the DJIA and S&P, and the largest for the Nasdaq since Oct. 2008. …