Chief Economist Scott Brown discusses current economic conditions.
Private–sector payrolls rose by 1.027 million in the initial estimate for August. Normally, such a gain would be considered outstanding. However, in this recovery, that comes as a disappointment.
Led by technology and large-cap companies, the S&P 500 is on pace to post its best summer performance in over 80 years.
Key Takeaways
The Fed updated its monetary policy framework, moving to a flexible average inflation target. That means that the central bank will target an average inflation rate of 2% (as measured by the PCE Price Index) over time.
While a panoramic view of broader economic and market developments will always be a crucial shot when constructing our outlook, sometimes it is important for us to bring certain sectors into focus.
In the minutes of the July 28-29 FOMC meeting, participants expected no change in policy rates anytime soon, but officials saw a need for more clarity regarding the likely path, such as adopting output-based forward guidance.
Initial claims for unemployment benefits fell below one million for the first time since mid-March (20 weeks). However, unadjusted claims had already dipped below that level a week earlier. Unadjusted claims totaled 831,000.
The overall economic outlook depends on the virus, efforts to contain it, and the degree of fiscal support. We’ve had a sharp- but-partial rebound in May and June, following a steep decline in March and April. The pace of improvement is expected to moderate. The impact of the pandemic has not been felt evenly.
This upcoming Wednesday is National Aviation Day, a holiday established by President Franklin Delano Roosevelt in order to honor the birthday of Orville Wright—inventor of the first airplane. While it’s hard to believe we’ve had the ability to fly for more than 115 years, it is even harder to comprehend the havoc that the COVID-19 pandemic has wreaked on the airline industry.
Nonfarm payrolls rose about as expected in the initial estimate for July, even as economists’ forecasts were widespread and risks to their job outlooks were generally seen to the downside. The unemployment rate fell a bit more than anticipated, but labor force participation stalled.
The pandemic has undoubtedly brought about a number of challenges for investors, but constructing a well-founded economic outlook and identifying opportunities in the midst of this unprecedented time are “always on my mind.” Until we can announce that COVID-19 ‘has left the building,’ our team will strive to do exactly that.
The U.S. economy contracted 9.5% through the second quarter, the worst single-quarter decline in gross domestic product (GDP) since the Commerce Department started tracking it in 1947. It was expected the report would show a dip, but it’s important to recognize what that dip represents.
Real GDP was reported to have fallen at a 32.9% annual rate in 2Q20. Nobody should have been surprised by that. Component data had already indicated massive and broad-based weakness and most economists’ estimates fell in the -30% to -35% range. News reports had generally implied that the downturn was ongoing. That’s clearly not that case...
Between the biggest week of earnings, the Fed meeting, and key economic data, there were plenty of headlines ‘hot off the press’ for the financial markets to handle this week, and as we look ahead, some of these same developments, as well as a few others still have the potential to ‘turn up the heat’ on market volatility.
The Federal Open Market Committee (FOMC) is expected to leave monetary policy unchanged. Officials won’t release revised economic projections until the mid-September FOMC meeting, but Chair Powell will provide an assessment of current economic conditions in his post-meeting press conference.
We distance ourselves from the chaos and panic of the crowd during pullbacks and from the ‘amusement’ and euphoria of rebounds and instead focus on providing a steady, reliable outlook that remains focused on risks on the horizon.
The pandemic had a significant impact on household spending in March and April, with a sharp contraction in consumer services (basically anything where people come into close contact with each other). The relaxation of social distancing guidelines has contributed to a sharp-but-partial rebound in May and June.
The economic calendar was thin. Investors remained concerned about rising cases of COVID-19. A return to a full lockdown appears unlikely, but the pace of improvement in the economy is expected to slow.
The U.S. Treasury is expected to announce a June budget shortfall of about $863 billion, bringing the 12-month total to nearly $3 trillion (or about 14% of pre-pandemic GDP). The red ink will continue. Lawmakers are expected to approve another round of federal stimulus later this month. None of that is worth losing sleep over.
The June job market report and other indicators remained consistent with an unprecedented steep drop in economic activity in March and April, followed by a sharp-but-partial rebound in May and June. Many of these data were collected before the recent surge in COVID-19 cases.
It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery.
As states ease their COVID-19 lockdown measures, rising case numbers have put pressure on equity markets.
The initial economic rebound seen in recent weeks won’t bring us back to pre-pandemic levels, explains Chief Economist Scott Brown. “A full recovery will take time.”
Efforts to contain the coronavirus have had a major impact on the global economy. There is still a lot of uncertainty in the outlook, which has three elements. First, there was a sharp decline U.S. Gross Domestic Product in 2Q20. Second, there was a sharp-but-partial rebound off the lows in May. Third, improvement after the initial rebound will slow, barring a vaccine or effective treatment for COVID-19...
In her recent book, “The Deficit Myth,” Stephanie Kelton, a professor at Stony Brook University, writes about many of the common misperceptions surrounding government debt and deficits.
Tomorrow is the summer solstice, the longest day of the year and the official start to summer! For those who are still fortunate enough to travel with friends and family this year, the trip may look a little different than usual given ongoing restrictions and social distancing guidelines still in effect.
The National Bureau of Economic Research (NBER) has formally declared that a recession began in February. The expansion lasted 128 months, the longest on record (at least back to 1854). Economic data reports should suggest that the downturn may have ended in April. That doesn’t mean everything is okay.
Equities suffered a heavy single-day decline amid rising jobless claims and continued coronavirus concerns.
Stock market participants remained optimistic about the economy, further encouraged by a surprisingly strong employment report for May. Bond yields moved above their recent range.
This week marked the 50th trading day since its March 23 low, with the S&P 500 rallying ~40% —the best 50 day rally since 1932. While the index has recovered ~85% of its virus-induced losses, there is still a distance to go, and if you are like me, the further the race goes, the more challenging it gets and the slower I advance.
In contrast to expectations of further deterioration, the May Employment Report suggested significant improvement in labor market conditions. No doubt, the economy has turned the corner as states have re-opened.
U.S. equity growth has been led by companies benefiting from heavy exposure to technology and an increase in remote work.
With state economies opening up, activity is expected to pick up the final two months of 2Q20. Real-time indicators show improvement. However, the figures for April are consistent with a sharp contraction in 2Q20, which won’t come close to being offset by May and June.
Our ears are ringing as the iconic bell on the New York Stock Exchange is dinging – in person – once again! This week, Governor Andrew Cuomo had the honor of reopening the trading floor for the first time in two months, but of course, there were a few new rules in place.
The Bureau of Labor Statistics reports that all 50 states experienced a decrease in payrolls and an increase in unemployment in April.
The stock market was choppy as investors bounced between hopes for a successful reopening of the economy and fears of a more prolonged slowdown.
In his May 13 webcast on the economic outlook, Federal Reserve Chairman Jerome Powell struck a cautious tone. That mood was reinforced by the economic data reports that followed. The economic outlook depends on the virus and efforts to contain it. There’s hope that monetary and fiscal support will carry us through and the virus will be checked.
Formula 1 celebrated the 70th anniversary of its first World Championship this week! More than four million spectators attended last year, many of whom were looking forward to commemorating the start of the landmark season this past March. Unfortunately, like many other events, COVID-19 forced Formula 1 to postpone its events for the foreseeable future.
After a significant recovery from March lows, coronavirus-driven fluctuations have reappeared in equity markets.
The April Employment Report was flawed, reflecting issues with data collection, classification, and methodology. However, results were consistent with an unprecedented, sharp deterioration in labor market conditions, mostly at the lower rungs. Payrolls fell by more than 20 million, nearly erasing the number of jobs gained since the financial crisis.
In a world filled with challenges there is no truer phrase than “Save one life, you’re a hero. Save a hundred lives, you’re a nurse.” And if we need any more reasons to celebrate and honor our nurses, this past Wednesday was National Nurses Day and next Tuesday will be 200 years since the birth of Florence Nightingale—the originator of modern nursing.
The April Employment Report was flawed, but signaled a sharp deterioration in labor market conditions. Nonfarm payrolls fell by 20.5 million, nearly erasing all of the job gains since the last recession.
We rely upon the ‘history’ of the market and the ‘science’ of evaluating economic indicators, but this period of uncertainty has pushed us to ‘think outside the box,’ and add an element of creativity to our investment views.
In recent weeks, the unprecedented surge in claims for unemployment benefits pointed to a horrific economic impact from COVID-19. That sinking feeling has been reinforced by the major economic releases, which have shown a sharp deterioration in economic activity in March – enough to substantially weaken the first quarter as a whole.
All three major U.S. equity indices saw double-digit recovery in April, though most levels are still far from pre-coronavirus highs.
COVID-19 has affected the data collection process for the major economic reports, including employment, consumer prices, retail sales, and industrial production. However, the incoming economic figures imply a stunningly swift, sharp decline in economic activity.
