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  • Economic news for the week included the Federal Reserve raising interest rates sharply in their fight with inflation. Data was mixed, with the index of leading economic indicators and retail sales softer, while industrial production improved. Producer prices remained high, but showed some deceleration. Housing starts and sentiment continued to decline, not helped by rising mortgage interest rates.
  • Global equity markets responded negatively to persistent worries over high inflation, rate hikes, and rising recession risks. Bonds fell back on higher yields globally, and pressure on credit. Commodities fell broadly with a pullback in crude oil and natural gas prices.

Fed Update 6-15-2022

6/15/2022 scott

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Fed Note:

The Federal Reserve Open Market Committee continued its aggressive tightening pace in the June meeting, by raising the key fed funds interest rate today by 0.75%—to a new range of 1.50-1.75%. This was the largest single meeting hike since 1994, and featured one dissenting vote (by a member favoring 0.50%). Why 0.75% and not 0.50%? It appeared the most recent consumer price index reading (still persisting around peak levels) and longer-term inflation expectations in the recent Univ. of Michigan consumer sentiment survey in recent days may have been catalysts for the stronger message and front-loading of hikes from later to earlier meetings....

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Economic Update 6-13-2022

  • Economic data for the week included consumer price inflation coming in high in keeping with expectations. Consumer sentiment remains challenged, at its lowest levels in decades, due to high inflationary pressures, notably with gasoline. Jobless claims were little changed, when adjusted for seasonal effects.
  • Global equity markets fell back last week, as high inflation reports and poor consumer sentiment dampened risk-taking. However, emerging market stocks fared better as pandemic conditions in China appear to be improving. Bond markets fell back again with interest rates rising across the board. Commodities were mixed overall, but oil and natural gas prices continued to move higher.
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Economic Update 6-06-2022

  • Economic data for the holiday-shortened week included a rise in manufacturing sentiment and small drop in services sentiment, despite both remaining solidly expansionary. House prices continued to increase at a dramatic pace. The May employment situation report outpaced expectations, although results were not as strong as in recent months.
  • Global equity markets fell back from a steep recovery the prior week, except for emerging markets, which gained ground as Chinese lockdowns eased. Bond prices declined as the result of higher treasury interest yields. Commodities were mixed, with higher energy prices offsetting a pullback in grains.
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Economic Update 5-30-2022

  • Economic data for the week included a slight downward revision in first quarter GDP, positive durable goods orders, along with weaker new home sales data and consumer sentiment.
  • Global equity markets rose broadly last week, with U.S. stocks outperforming foreign. Bonds also fared positively, with interest rates pulling back upon a possible peaking in inflationary pressures. Commodities rose due to gains in crude oil and natural gas.
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Economic Update 5-23-2022

  • Economic data for the week included gains in retail sales and industrial production. On the other hand, regional manufacturing sentiment fell back, as did several housing metrics as activity slowed along with historically-low residential home inventories.
  • Global equities were mixed on the week, with U.S. stocks down sharply once again, while foreign stocks gained ground. Bonds fared positively, with interest rates backing off of peaks. Commodities gained a bit, led by industrial metals rather than oil.
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Economic Update 5-16-2022

  • Economic data for the week included higher readings for the producer price and consumer price indexes—continuing a trend of higher inflation. However, import prices saw some relief. Continuing jobless claims fell further to very low levels, indicating labor market strength.
  • Global markets fell back sharply last week, as volatility amidst a variety of geopolitical and financial crosswinds as well as a rising interest rate regime kept sentiment depressed. Bonds reversed course and saw gains as longer-term yields fell back from recent peaks. Commodities were mixed, with little change in oil prices, which remained high.
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Economic Update 5-09-2022

  • Economic data for the week included the Federal Reserve raising short-term interest rates by a half-percent, an amount not seen in over two decades. The employment situation report for April continued to show a strong improvement in jobs, while the unemployment rate remained unchanged at a tight level. ISM manufacturing and services fell back a bit, but remained solidly in expansionary territory.
  • Global equity markets experienced another volatile week, with U.S. stocks outperforming foreign markets. Bonds also declined along with rising interest rates, prompted by the Fed policy move. Commodities ended higher, driven by tight crude oil supplies.

Fed Update 5-04-2022

5/4/2022 scott

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The Federal Reserve Open Market Committee turned more aggressive in this month’s meeting by raising the key fed funds interest rate by 0.50%—for the first time in over twenty years by that amount—to a new range of 0.75-1.00%. There were no dissents. This was in line with consensus estimates, steered by Fed member comments over the past few weeks that guided markets to anticipate this more hawkish outcome.

The formal statement language noted that economic activity edged down in Q1, although household and business spending remains strong, as are job gains. Inflation was described as remaining elevated, reflecting ongoing pandemic disruptions as well as higher energy prices, although broadened to other areas. Ukraine was also mentioned as an additional source of geopolitical uncertainty, and Covid lockdowns in China continuing to weigh on supply disruptions. In addition to today’s rate hike, ‘ongoing’ rate increases were seen as appropriate. Guidelines for balance sheet reduction were also outlined, set to begin in June at $47.5 bil./mo., ramping up to $95 bil./mo. after three months.

Based on CME data, formal probabilities of a 0.50% fed funds hike ticked up a few percentage points in recent days to just under 100%1. In addition, a 0.75% rate increase is the highest expected outcome for June. The September level is predicted to reach 2.50-2.75% (around the Fed long-term neutral rate), and 3.00-3.25% by December, although that features more outcome dispersion on both sides. The latest period available, Jul. 2023, shows the highest probability being 3.50-3.75%, implying some slowing in the hiking pace by that time. Regardless, markets are predicting a much more aggressive Fed pace than we’ve been used to, although these probability markets are subject to rapid change.

The Fed’s evaluation metrics remain mixed, in terms of high inflation being offset by still decent, but decelerating economic growth fundamentals: ...

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Economic Update 5-02-2022

  • Economic data for the week included a surprisingly negative U.S. GDP result for the first quarter. Housing data was mixed, with slower sales, but home prices reached record highs. Consumer sentiment fell back a bit, but durable goods rose, and jobless claims remained positive, and near multi-decade lows.
  • Global equity markets fell back sharply last week, due to mixed earnings reports, high commodity prices, slowing growth, and Ukraine concerns. Bonds were little changed in the U.S., but were negatively impacted abroad by an especially strong U.S. dollar. Commodities were mixed, with higher energy prices offsetting declines in metals.
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Economic Update 4-25-2022

  • Economic data for the week included declines in several national housing numbers, such as existing home sales and homebuilder sentiment; however, housing starts rose a bit. The index of leading economic indicators showed growth, but at a tempered pace from preceding months.
  • Global equity markets fell back last week, in keeping with continued concerns over the ongoing Ukraine war as well as hawkish rhetoric from global central bankers. Bonds declined due to that same rhetoric, which pushed intermediate-term interest rates higher, and foreign bonds hurt by a stronger dollar. Commodities reversed trend last week, by falling back across the board, notably in energy.
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Economic Update 4-18-2022

  • Economic data for the week included gains in retail sales, as well as improvement in consumer sentiment, and continued healthy jobless claims. However, producer and consumer price inflation continued to come in at multi-decade high levels.
  • In a holiday-shortened week, global equity markets were mixed to lower, as high inflation readings and negative sentiment about Ukraine weighed on risk-taking. Foreign outperformed the U.S. slightly due to a weaker dollar. Bonds continued to lose ground as interest rates climbed higher in keeping with high CPI and PPI readings. Commodities also gained, with crude oil and natural gas prices rising sharply.
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Economic Update 4-04-2022

  • Economic data for the week included minimal revisions to prior-quarter U.S. GDP growth, and a slight decline in the pace of still-positive ISM manufacturing sentiment. Housing prices continued to rise at a solid clip, while labor markets continue to demonstrate a recovery, notably in nonfarm payrolls for March.
  • U.S. equity markets were little changed on net, and were outshined by gains in foreign markets. Bonds gained ground to end the quarter, as interest rates fell back from highs. Commodity prices fell back, led by energy, along with a potential increase in crude oil supply from government reserves.
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Economic Update 3-28-2022

  • Economic data for the week included a decline in durable goods orders and new home sales, and consumer sentiment fell to multi-year lows. However, jobless claims again reached multi-decade levels of strength.
  • U.S. equity markets gained ground last week, despite a more hawkish Fed; foreign markets were mixed, based on the relative impacts of high energy prices and the war in Ukraine. Bonds fell back sharply, as hawkish central bank language caused interest rates to drift higher in a variety of maturities. Commodities continued to gain across the board along with supply shortages, notably in energy and metals, due to the war in Ukraine and associated Russian sanctions.
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Economic Update 3-21-2022

  • In economic news, the Federal Reserve raised interest rates for the first time in several years, by a quarter percent. In other data releases, retail sales and industrial production increased, as did housing starts, while jobless claims also came in better than expected. Producer prices continued their rise, and the index of leading economic indicators improved.
  • Global equity markets rose last week with a tempering in commodity prices, a Fed that acted on the more tempered side, and rumors of progress in Ukraine-Russia peace talks. U.S. bonds fell back as interest rates ticked higher, along with hawkish Fed language. Commodities fell back due to concern over lower demand in China, due to Covid lockdowns.

Fed Update 3-16-2022

3/16/2022 scott

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The Federal Reserve Open Market Committee raised the key fed funds interest rate today by 0.25%, to a new range of 0.25-0.50%. This first hike in four years was as expected, with the Fed communicating their intention and amount fairly directly in recent weeks. However, at least until the Russian invasion of Ukraine, there was debate about whether the hike could be as high as 0.50%. In fact, there was one dissent in the committee decision, by Fed St. Louis President Bullard, who preferred the 0.50% hike....

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Economic Update 3-14-2022

  • Economic data for the week included the consumer price index rising to another multi-decade high, job openings continued to show strength, while jobless claims were little changed.
  • Global equity markets lost ground again in keeping with the geopolitical and economic aftermath of the Ukraine conflict, although hopes for diplomacy resulted in a few positive days. Bonds fell back as well, with interest rates rising on net along with record inflation data. Commodities prices pulled back after a strong run since the start of the conflict.
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Economic Update 3-07-2022

  • Economic data for the week included a robust employment situation report, as well as other labor metrics, and improved manufacturing and construction activity.
  • Global financial market sentiment continued to be driven by the Russia-Ukraine conflict, with U.S. and especially foreign stocks losing ground and staying in correction territory. Bonds were mixed, with higher-quality safe haven debt faring positively. Commodities experienced sharp gains, led by crude oil and grains—exports most affected by Russian and Ukrainian supplies.
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Economic Update 2-28-2022

  • Economic data for the week included a slight revision to prior-quarter GDP, a continued gain in house prices, and continued lower jobless claims. However, the Russian invasion of Ukraine dominated most other news.
  • Global equity markets initially fell sharply last week, in the ramp-up to the Russian invasion, which had been brewing for weeks. However, stocks recovered after the military activity started and rumors of negotiations came. U.S. bonds started strong but fell back as interest rates ticked higher along with a return to inflation worries. Commodities gained across the board, notably in energy and agriculture, due Russian and Ukrainian-specific supply concerns.
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A variety of conflicts involving major world powers have tended to historically raise short-term volatility in global financial assets. However, market damage has tended to be short-lived, as in the magnitude of a typical market correction (-10% or a bit more). One has currently been already underway since January, mostly due to interest rate fears, but also the probability of Russian military action in the Ukraine. Markets have reacted worse (such as -20% bear market-type declines) during broader regional conflicts, such as World War II or the Israel/Arab war in 1973. In the majority of cases, though, recoveries have also been relatively swift, and there has not been as much direct long-term economic impact as one might fear...

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Economic Update 2-22-2022

  • Economic data for the week included retail sales that came in higher than expected, as well as gains in industrial production, mixed regional manufacturing sentiment and housing metrics, and a slight pullback in the index of leading indicators.
  • U.S. and foreign equity markets fell back last week, as tensions over Russia and Ukraine wavered (generally rising), in addition to continued strong U.S. inflation rhetoric. Bonds were mixed, with yields little changed, but credit spreads widened. Commodities were also mixed, with gains in metals offset by a pullback in oil prices by several percent.
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Economic Update 2-07-2022

  • Economic data for the week included a much stronger than expected employment situation report for January, as well as a pullback in the ISM manufacturing and services indexes, although the two still lie solidly in expansion.
  • Global equity markets bounced back last week, with decent economic data and some improvement in the Covid caseload. Bonds fell back across the board, as interest rates continued to tick higher, along with the consensus opinion that central banks will be raising rates through 2020. Commodities gained ground again last week, led by crude oil prices, with high demand continuing to surpass more limited supply.
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Economic Update 1-31-2022

  • Economic data for the week included the Fed signaling upcoming rate hikes, a stronger-than-expected GDP growth report for Q4, and robust housing data, but a weaker durable goods report.
  • U.S. equity markets ended mixed to higher in a volatile trading week, with large cap stocks outperforming small caps. Foreign stocks generally were negative, in keeping with a stronger dollar. Bonds fell back broadly along with higher interest rates following a hawkish Federal Reserve. Commodities gained, mostly in the energy sector—particularly due to weather, Ukraine, and market technicals in natural gas.

Fed Update 1-26-2022

1/26/2022 scott

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Fed Note:

The Federal Reserve Open Market Committee made no changes in interest rates today, as expected, staying with the target of 0.00-0.25%. But, times are changing.

The formal statement language was significantly simplified from December, that economic activity and employment have ‘continued to strengthen’, but also acknowledged the sharp recent rise in Covid cases on particular sectors. High inflation was attributed to ongoing ‘supply and demand imbalances’. However, the FOMC expects that it will ‘soon be appropriate’ to raise interest rates. The tapering off of treasury and mortgage-backed bond purchases was ramped up, scheduled to end in ‘early March’....

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Economic Update 1-24-2022

  • Economic data for the holiday-shortened week included mixed regional manufacturing results and housing data, higher jobless claims, but continued gains in the index of leading indicators.
  • U.S. equity markets, especially the Nasdaq-heavy group of technology stocks, fell back near or into correction territory. Foreign stocks fared slightly better than U.S., although also in the negative. Bonds were mixed, based on risk level. Commodities gained a bit on net, along with continued tight supplies in crude oil markets.
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Economic Update 1-18-2022

  • Economic data for the week included continued historically-strong producer and consumer inflation readings, while retail sales came in weaker than expected.
  • U.S. equity markets fell back last week, as investor continued to digest tighter monetary policy and the impact of the Covid omicron variant. Foreign stocks fared a bit better, due to a weaker dollar. Bonds were mixed, with lower-rated bonds outpacing investment-grade, with yields moving slightly higher. Commodities gained in keeping with a weaker dollar and rising crude oil prices.
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Economic Update 1-10-2022

  • Economic data for the week included a disappointment in December nonfarm payrolls, although the unemployment rate continued to improve. ISM manufacturing and services both fell back for the month, but remained solidly in expansion. Minutes from the Dec. Fed meeting showed a more hawkish tone than did the original statement released at the time.
  • U.S. equity markets fell back along with higher yields, hawkish Fed meeting minutes, and higher commodity prices. Foreign stocks fared better, with mixed results. Bonds fell back sharply, as a result of higher long-term interest rates. Commodities gained, due to a geopolitical-based spike in energy prices.
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Economic Update 1-3-2022

  • For the final week of 2021, sparse economic data included a continued rise in national home prices, although pending sales fell back. Jobless claims continued to show downward improvement.
  • Global equity markets ended the year on a positive note last week. Bonds were mixed, as interest rates were little changed. Commodities gained more ground, with help from a weaker dollar and hopes for continued demand recovery.
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Economic Update 12-27-2021

  • Economic data during the holiday week included a slight revision upward for Q3 U.S. GDP, and a slight improvement in consumer confidence. Durable goods orders and housing metrics were mixed.
  • Global equity markets gained broadly last week, as fear of the Covid omicron variant’s severity seemed to subside a bit. Bonds were mixed to lower along with higher interest rates. Commodities also fared well, particularly in oil and metals, where the demand outlook was again viewed more positively.
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Economic Update 12-20-2021

  • Economic data for the week included the Federal Reserve announcing a faster pace in the tapering off of bond purchases, reflecting stronger growth and inflation pressures, as seen by last week’s high PPI number. Retail sales and industrial production rose, while several regional manufacturing indexes were mixed. Housing metrics also continued to improve.
  • Global equity markets fell as fears of the omicron variant and Fed tightening intensified toward the end of the week. Bonds fared well with investors avoiding risk, which pushed long-term rates lower. Commodities were mixed, with gains in metals offset by declines in energy.

Fed Update 12-15-2021

12/15/2021 scott

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Fed Note:

The Federal Reserve Open Market Committee made no changes in interest rates today, as expected, staying at the target of 0.00-0.25%.

However, in keeping with intensified market expectations in recent weeks (and signaled by the Fed itself), a key policy change was a doubling in the pace of tapering (to $30 bil./month) off of treasury and mortgage-backed bond purchases. This implies they’ll finish buying completely by early Q2 2022. The tone was a bit more hawkish than the market perhaps expected.

The formal statement language noted that a variety of sectors continue to be affected by Covid, including new variants, although job gains have been ‘solid in recent months’. Supply/demand imbalances were still noted as contributing to elevated inflation.

The dot plot seems to imply three rate moves next year, at a median rate of 0.75-1.00%. Compared to the September report, inflation forecasts have risen sharply from 4.2% to 5.3% in 2021, but only from 2.2% to 2.6% in 2022. The unemployment rate forecasts have moved in the other direction, moving lower by -0.5% this year and by -0.3% in 2022 (to a low 3.5% level). GDP expectations have fallen by -0.4% this year, with mixed results over the next several years.

Persistent inflation being no longer ‘transitory’ (per Jerome Powell’s words), has been the most important recent change in sentiment, with growing pressure to move away from accommodative policy. This also pulls the timeline for rate increases forward, from late 2022 to possibly as soon as mid-2022. This means next year could much more interesting than the last few years.

The Fed’s evaluation metrics remain mixed and heavily debated (and more fluid than usual):...

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Economic Update 12-13-2021

  • In a lighter week for economic data, releases included consumer price inflation reaching a 40-year high, while jobs statistics continued to show improvement.
  • Global equity markets rose with waning concern over the severity of the Covid omicron variant, and its potential impacts on economic growth. Bonds were mixed, with high-grade debt falling back due to rising rates, while bonds of lower credit quality fared positively. Commodities gained as crude oil prices bounced back strongly.
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Economic Update 12-06-2021

  • Economic data for the week included stronger manufacturing data and higher home prices, while consumer sentiment fell back a bit. The employment situation report came in far weaker than expected on a headline basis, although other data appeared more robust.
  • U.S. equity markets fell back last week upon the Federal Reserve’s evolving opinion of inflation and the uncertainty surrounding the new Covid omicron variant; foreign stocks, however, fared better. Bonds gained ground in keeping with investors moving away from risky assets. Commodities lost ground, with the prices of crude oil and natural gas continuing to fall on demand concerns.
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Economic Update 11-29-2021

  • In a holiday-shortened week, economic data included stronger personal income and spending, as well as recovering consumer sentiment, while durable goods orders fell back. Housing data was strong in both new and existing home sales.
  • Global equity markets were benign until Friday, when the emergence of a new Covid variant rattled investors. U.S. treasury bonds fared slightly positive due to flows away from risk, while credit and emerging market bonds fell back. Commodities also fell back, highlighted by a rapid correction in the price of crude oil.
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Economic Update 11-15-2021

  • Economic data for the week included higher ongoing readings for producer and consumer price inflation—the latter rising at the fastest year-over-year rate in three decades. The trend in improving jobless claims also slowed, and consumer confidence fell.
  • Global equity markets declined in keeping with a higher U.S. inflation report, weaker sentiment, and rising foreign Covid cases. Bonds reversed course and pulled back as long-term rates ticked higher. Commodities were mixed, but energy fell back contrary to recent trends.
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Economic Update 11-08-2021

  • Economic data for the week included the Federal Reserve beginning its ‘taper’, coupled with weaker manufacturing results, but new all-time highs in services sentiment. The employment situation report for October surpassed expectations, reversing disappointment of the prior month.
  • Global equity markets gained with continued economic and earnings improvement, and less hawkish-than-expected world central bank policy. Bonds fared well globally as interest rates declined. Commodities ended the week mixed, with declines in energy and industrial metals offset by gains in precious metals.
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Economic Update 11-01-2021

  • Economic data for the week included weaker-than-expected U.S. GDP growth for the third quarter, and declines in durable goods orders and pending home sales. However, home prices, new home sales, consumer confidence, and jobless claims all improved.
  • Global equity markets were mixed, with gains in the U.S. offset by little change in Europe, and declines in emerging markets. Domestic bonds fared positively due to a decline in interest rates. Commodities featured little change in energy prices, and mixed results in grains and metals.
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Economic Update 10-25-2021

  • Economic data for the week included manufacturing indexes which leveled off a bit from highs, while on the positive side, jobless claims fell to new cyclical lows. Home sales and housing starts were mixed, with prices moving higher and inventories remaining tight.
  • Global equity markets continued their positive performance, due to strong earnings results for the prior quarter. Bonds suffered, as interest rates rose again in keeping with improving conditions. Commodities were mixed, with metals falling back, while energy again experienced gains.
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Economic Update 10-18-2021

  • Economic data for the week included stronger-than-expected results for retail sales, while inflation continued to come in elevated for producer, consumer, and import prices. Job openings and jobless claims also continued to strengthen as labor markets show improvement.
  • Global equity markets rose along with improving economic data, and inflation that came in no worse than expectations. Bonds also gained as long-term interest rates declined. Commodity prices continued to rise with prices for copper and other metals overtaking the energy story last week.
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Economic Update 10-11-2021

  • Economic data for the week included improvement in ISM non-manufacturing sentiment, ADP private employment, and jobless claims. However, the employment situation report for September came in short of expectations.
  • U.S. equity markets gained last week, in contrast to a negative September, while foreign regions ended mixed. Bonds lost ground globally as interest rates rose, in keeping with persistent inflation concerns. Commodities gained several percent, as crude oil prices reached a multi-year high upon strong demand and lack of available supply.
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Economic Update 8-02-2021

  • Economic data for the week included Q2 GDP growth that came in robust, but below market expectations. Housing metrics were mixed, with strong prices but weaker sales. Consumer confidence continued to improve slightly.
  • U.S. equity markets were mixed, as large caps lost ground but small caps gained. Foreign stocks were similarly mixed, with emerging markets were pulled down by volatility in certain Chinese sectors. Bonds gained slightly as interest rates continued to pull back. Commodities were helped from a weaker dollar, particularly in energy and industrial metals.


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Economic Update 6-08-2020

  • Economic data released last week continued to show broad shutdown-based weakness over the past several months, in manufacturing, services, construction, and employment. However, some signs of improvement are being seen on the margin, which have been taken positively by financial markets.
  • U.S. equity markets gained with signs of economic recovery and a strong jobs report later in the week; foreign markets moved higher to an even greater degree. Bonds lagged with interest rates ticking higher on this same strength. Commodities rose with another strong recovery in crude oil, as producing nations discussed further supply cuts and demand is up.
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Economic Update 6-01-2020

  • On a shortened holiday week, economic data continued its lackluster trend, now reporting the well-known weakness of April and May in many industries. Included were weaker numbers for durable goods, jobless claims, and pending home sales. Consumer sentiment and housing prices were mixed.
  • Global equity markets gained with optimism over lockdowns easing and a slow return to normalized activity. Foreign stocks outperformed U.S., helped by a weaker dollar. Bonds gained upon lower interest rates, and tighter credit spreads. Commodities gained along with hopes for economic recovery, led by higher crude oil prices—which have come a long way in recent weeks.