The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, dropped to 44.3 in January from 44.9 in December, marking the fifth straight month in contraction territory. Values above 50.0 indicate expanding manufacturing activity. This reading comes in below the Investing.com forecast of 45.0.
Market Indicators
The FOMC Won’t Blink
As expected and discussed in the January Macro Tides the December Consumer Price Index (CPI) dropped below 7.0% falling to 6.5% from 7.1% in November.
January 2022: Market Valuation, Inflation and Treasury Yields
Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations for investment returns. On August 4, 2020, the 10-year Treasury yield hit its all-time low of 0.52%. As of January 31, 2023, it was at 3.52%
Fed Seeks to Balance Competing Risks
Investors face mixed signals between the Federal Reserve’s policy guidance and recent economic developments.
P/E10: January 2022 Update
Here is the latest update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates, and the index monthly average of daily closes for the past month.
Regional Differences in European GDP Trends
On Monday, Germany’s GDP print for the final quarter of 2022 came out below expectations of 0.0% by -2%.
The "Real" Goods on the December Durable Goods Data
The Census Bureau has posted its advance report on durable goods new orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's review durable goods data with two adjustments.
Meta Shares Soar as Zuckerberg Declares 'Year of Efficiency'
Meta Platforms Inc.’s shares soared more than 20%, on track for their biggest gain in 10 years, after Chief Executive Officer Mark Zuckerberg announced plans to make the social media giant leaner, more efficient and more decisive.
Research Reports
The Fed downshifted to a smaller rate hike to start 2023, but the job is far from done.
Treasury Yields: A Long-Term Perspective
As of January 31, 2023, the 10-year note was 300 basis points above its historic closing low of 0.52%, reached on August 4, 2020.
Regression to Trend: 115% Above Trend in January
Quick take: At the end of January the inflation-adjusted S&P 500 index price was 115% above its long-term trend, unchanged from the previous month.
About the only certainty in the stock market is that, over the long haul, over-performance turns into underperformance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.
The Q Ratio and Market Valuation: January Update
The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Note: This update includes January close data.
Weekly Unemployment Claims: Down 3K, Better Than Forecast
This morning's seasonally adjusted 183K new claims, down 3k from the previous week's unrevised figure, came in below the Investing.com forecast of 200K.
Wall Street Shrugs Off 'Fed’s Tough Talk' to Cheer Smaller Hikes
Wall Street had widely expected that the Federal Reserve would ease up on its pace of rate hikes to battle inflation on Wednesday.
Fed Slows Rate Hikes, Signals Further Increases Are Coming
The Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.
CPI and PCE: Two Measures of Inflation and Fed Policy
The BEA's Core Personal Consumption Expenditures Chain-type Price Index for December, released last Friday, shows that core inflation continues to be well above the Federal Reserve's 2% long-term target at 4.42%. The December core CPI release was higher, at 5.71%. The Fed is on record as using core PCE data as its primary inflation gauge.
What to Watch
The market has high hopes for the Fed, however, comparing this to the Fed’s own expectations, we see a very different narrative.
Where is the Recession?
Inflation appears to have peaked, led by improvements in core goods prices and rate-sensitive sectors like housing.
ISM Manufacturing Index Continues Contraction in January
This morning the Institute for Supply Management published its monthly Manufacturing Report for January. The latest headline purchasing managers index (PMI) was 47.4, down 1.0 from the previous month and in contraction territory. This marks the third consecutive month in contraction territory after a 29-month period of growth dating back to June 2020. Today's headline number was below the Investing.com forecast of 48.0.
Is the Fed Winning the Inflation War?
In anticipation of tomorrow’s rate decision, we saw another indicator today that the Federal Reserve has been successful in stemming the tide of inflation.
January S&P Global US Manufacturing PMI™: Declining Further
The January S&P Global US Manufacturing PMI™ came in at 46.9, up 0.7 from the final December figure, and marginally better than the Investing.com forecast of 46.8. However, this marks the third consecutive month in contraction territory. S&P Global US Manufacturing PMI™ is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
Is the Bubble About to Burst?
I chose the topic for this month’s Absolute Return Letter during the Christmas break.
December Job Openings & Labor Turnover
The latest job openings and labor turnover summary (JOLTS) report, with data through December, is now available.
Moving Averages: S&P Closes Month Up 6.18%, Best January Finish Since 2019
Valid until the market close on February 28, 2023.
The S&P 500 closed January with a monthly gain of 6.18%, it's highest since 2019, after a loss of 5.9% in December. At this point, after close on the last day of the month, one of five S&P 500 strategies are signaling "cash" — Invesco DB Commodity Index Tracking (DBC) — down from from last month's quadruple "cash" signal.
January Regional Fed Manufacturing Overview
Five out of the 12 Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. The latest average of the five for December is -12.44, down from the previous month.
Weekly Gasoline Prices: Regular and Premium Continue to Climb for 5th Week In A Row
As of January 30, the price of regular and premium gas were up 7 and 8 cents each, respectively, from the previous week. According to GasBuddy.com, Hawaii has the highest average price for regular at $4.89 and Texas has the cheapest at $3.09. The WTIC end-of-day spot price for crude oil closed at $77.90 and is down 4.6% from last week.
Earnings Season Takes Center Stage
Review the latest Weekly Headings by CIO Larry Adam.
Home Ownership Rate: 65.9% in Q4 2022
Over the last decade, the general trend has been consistent: The rate of homeownership has struggled. The Census Bureau has now released its latest quarterly report with data through Q4 2022.
Consumer Confidence Declines in January
The headline number of 107.1 was a decrease of 1.9 from the upwardly revised final reading of 109.0 for December.
Chicago PMI Down in January, Worse Than Forecast
The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, dropped to 44.3 in January from 44.9 in December, marking the fifth straight month in contraction territory. Values above 50.0 indicate expanding manufacturing activity. This reading comes in below the Investing.com forecast of 45.0.
10 Macroeconomic Themes for 2023
Guggenheim Investments’ Macroeconomic and Investment Research Group identifies 10 macroeconomic trends likely to shape monetary policy and investment performance this year.
November S&P/Case-Shiller Home Price Index Continues Decline
With this morning's release of the November S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index saw a 0.5% decrease month over month. The MoM is reduced to -1.2% after adjusting for inflation. The non-seasonally adjusted national index saw a 7.7% YoY increase.
FHFA House Price Index Down 0.1% in November
The Federal Housing Finance Agency (FHFA) has released its U.S. house price index (HPI) for November. U.S. house prices decreased by 0.1% from the previous month. Year-over-year the index is up 8.2% on a non-seasonally adjusted nominal basis. After adjusting for inflation and seasonality, the index is was unchanged in November and up 1% year-over-year (seasonally adjusted).
World Markets Update: January 30, 2023
Seven of eight indexes on our world watch list posted gains through January 30, 2023. The top performer continues to be Hong Kong's Hang Seng with a YTD gain of 11.57%. France's CAC 40 is in second with a YTD gain of 9.40%, and Germany's DAXK remains in third with a YTD gain of 8.64%. Coming in last for the fourth straight week is India's BSE SENEX with a loss of 2.20% YTD.
Moving Averages Month-End Preview: Up 4.6% in January
Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month.
Stocks Decreasing to Start the Busy Week
U.S. stocks declining, as the markets trim a strong start to 2023 ahead of this week's host of key economic and earnings data, as well as the Fed's monetary policy decision.
The Labor Market Is Still Historically Tight
With wage growth still strong and unemployment low, the labour market is still historically tight. For now.
Debt Limit Drama
The US federal budget is on an unsustainable path…but not for the reasons that most people think.
Dallas Fed Manufacturing Growth Slows in January
The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for January. The latest general business activity index came in at -8.4, up 11.6 from last month. All figures are seasonally adjusted.
Are Inflation Targets Still On Point?
Now is not the time to consider changing inflation targets.
The Big Four: Real Personal Income in December
Personal income (excluding transfer receipts) in December rose 0.27% and is up 5.3% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, real personal income (excluding transfer receipts) MoM was up 0.21% and was up 0.3% year-over-year.
A “Soft Landing” Scenario – Possibility Or Fed Myth?
Optimism is increasing on Wall Street, with investors hoping for a “soft landing” in the economy.
Dollar's Decline Is a Rare Nasdaq Tailwind as Earnings Loom
While tech investors have plenty of issues to worry about as the sector heads into a key week for corporate earnings, one notable headwind from last year has eased in recent months: the dollar.
Fed's Wall Street Clash Sets Stage for Powell’s Hawkish Message
Jerome Powell and Wall Street are headed for another face-off this week as the Federal Reserve seeks to slow its inflation-fighting campaign without signaling a readiness to stop.
Stocks Are Poised to Hit New Lows This Year, Survey of Investors Shows
Investors have little confidence in US stocks even after this month’s surge, fearing weak corporate earnings could drag them back down.
Real Disposable Income Per Capita Continued to Inch Up in December
With the release of Friday morning's report on December's personal incomes and outlays, we can now take a closer look at "real" disposable personal income per capita. At two decimal places, the nominal 0.22% month-over-month change in disposable income comes to 0.17% when we adjust for inflation. This is a decrease from last month's .28% nominal and 0.18% real change. The year-over-year metrics are 2.71% nominal and -2.20% real.
PCE Price Index: December Headline at 5% YoY
The BEA's Personal Income and Outlays report for December was published on Friday morning by the Bureau of Economic Analysis. The latest headline PCE price index was up 0.05% month-over-month (MoM) and is up 5.02% year-over-year (YoY). Core PCE (YoY) dropped to 4.42%, still well above the Fed's 2% target rate.
Pending Home Sales Increased 2.5% in December, Ending Six-Month Slide
The National Association of Realtors released the December data for its pending home sales index. According to the National Association of Realtors®, "Pending home sales increased in December for the first time since May 2022 — following six consecutive months of declines."
Growth Pains
In stock investing there’s a management style called “growth at a reasonable price” or GARP. It seeks to achieve steadier results by avoiding both expensive growth stocks and beaten-down value stocks.
I Asked ChatGPT to Write About Airline Deregulation in the U.S. Here’s How It Went
Since its launch in November, ChatGPT has been a smash hit. To explore the benefits of airline deregulation in the U.S., we sought the help of the AI content generator.
Key Inflation Gauge Cools Further, Paving Way for Smaller Fed Rate Hike
The Federal Reserve’s preferred inflation measures eased in December to the slowest annual paces in over a year while consumer spending fell, helping pave the way for policymakers to further scale back the pace of interest-rate hikes.
Stagflation! Is Now the time to buy Precious Metals
It is believed that during stagflation, investors tend to turn to gold as a safe haven asset as the economic and financial conditions are uncertain. Additionally, gold is seen as a hedge against inflation, as its value is not tied to any currency or government.
An Inside Look at the GDP Q4 Advance Estimate
The accompanying chart is a way to visualize real GDP change since 2007 and uses stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.
Are Inflation Targets Still On Point?
Now is not the time to consider changing inflation targets.
CFNAI Components: Employment, Production, Consumption, Sales
The Chicago Fed's National Activity Index, which I reported on yesterday, is based on 85 economic indicators drawn from four broad categories of data:
Q4 Real GDP Per Capita: 2.5% Versus the 2.9% Headline Real GDP
The advance estimate for Q4 GDP, to one decimal, came in at 2.9% (2.89% to two decimal places), a decrease from 3.2% (3.24% to two decimal places) for the Q3 third estimate. With a per-capita adjustment, the headline number is lower at 2.52% to two decimal points.
GDP and Jobs Show the Stock Market Bears Are Still Early
There’s a price to be paid for being early in investing even if you get the broader story right, as US stock market bears are learning the hard way.
US Economy Shows Slowdown Signs After Growing 2.9% Last Quarter
The US economy grew faster than forecast into the end of 2022, but there were signs of slowing underlying demand as the steepest interest-rate hikes in decades threaten growth this year.
Big Tech Binged on Workers During Covid. Now, the Purge
The layoff announcements coming lately from the chief executive officers of big technology companies all contain variations on the theme of “we hired too many people during the pandemic,” expressed with varying degrees of contrition.
The Philly Fed ADS Business Conditions Index Update
We've updated our periodic look at the Philly Fed ADS Index which includes real GDP (Q4 2022 release) and initial jobless claims through 1/21.
European Outlook: Less Downside Now, But Caution Still Warranted
Focusing on high quality and liquidity when taking risk in portfolios will be key in 2023, as pressure on monetary policy remains intense.
Kansas City Fed Manufacturing Survey: Activity Was Flat
The latest index came in at -1, up 3 from last month's revised figured, indicated a slower pace of decline compared to December. The future outlook declined to 3. All figures are seasonally adjusted. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.
New Home Sales Up 2.3% in December
This morning's release of the December new home sales from the Census Bureau came in at 616K, up 2.3% month-over-month from a revised 602K in November. The Investing.com forecast was for 617K. The median home price is now at $442K.
Chicago Fed: Little Change in Economic Growth in December
The Chicago Fed National Activity Index (CFNAI) edged up to -0.49 in December from -0.51 in November. Three of the four broad categories of indicators used to construct the index made negative contributions in December, but two categories improved from November. The index's three-month moving average, CFNAI-MA3, decreased to -0.33 in December from -0.14 in November.
Selecting the Best Dividend Growth Stocks for Total Return: Part 2
In part 1 of this two-part series on dividend growth stocks, I stressed the importance of having a plan.
China Reopening an Insignificant Factor for Germany So Far
Yesterday, we got our first look at December’s economic data for Europe, in the form of PMIs.
Headline Durable Goods Orders Up 5.6% in December
The latest new orders number at 5.6% month-over-month (MoM) was better than the Investing.com 2.5% estimate. The series is up 11.9% year-over-year (YoY). If we exclude transportation, "core" durable goods was down 0.1% MoM and up 2.1% YoY.
The Case for the Federal Reserve to Pause Right Now
If you believe in the Milton Friedman adage that inflation is always and everywhere a monetary phenomenon, then you should also believe that the Federal Reserve can stop increasing interest rates. Now.
Global Economic Outlook: Run-of-the-Mill
The Northern Trust Economics team shares its outlook for key markets in the month ahead.
US PMIs Show the Fed Walking a Fine Line
The US Purchasing Managers Composite Index (PMI) increased in January to 46.6 from 45 in December, representing a slowing economy but slightly less pessimistic than expected and better than the month before.
In Defense of Millennials
Older advisors need to step aside and make room for the up and comers.
Stocks Lack Direction in Choppy Trading
U.S. equities finished mixed in a lackluster trading session, as Q4 earnings season shifted into a higher gear today.
After a Timeout, Back to the Meat Grinder!
The first and easiest leg of the bursting of the bubble we called for a year ago is complete.
Debt-Limit Fight Risks Early End to Fed Quantitative Tightening
The Federal Reserve’s quantitative-tightening program risks being propelled toward an early end as US politicians bicker in Washington over raising the national debt limit, according to some economists and bond-market participants.
Creating a Plan for Long-Term Care
Two major issues clients should consider in creating their own long-term care plan are where they will live and how they will pay for the care they are likely to need.
Richmond Fed Manufacturing Declined in January
Fifth district manufacturing decreased in January, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite manufacturing index is at -11 in January, down 12 from December. This is worse than the Investing.com forecast of -5.
Rearview Mirror OK, Collision Ahead
First, the good news: we estimate that real GDP grew at a solid 2.8% annual rate in the fourth quarter.
Microsoft Invests $10 Billion in ChatGPT Maker OpenAI
Microsoft Corp. is investing $10 billion in OpenAI, whose artificial intelligence tool ChatGPT has lit up the internet since its introduction in November, amassing more than a million users within days and touching off a fresh debate over the role of AI in the workplace.
Pushing Your Luck
The problem with speculation is that there’s usually a gap between the underlying risk and the inevitable outcome.
Nvidia to Win Big From ChatGPT Hype, Wall Street Predicts
In the weeks since the ChatGPT artificial intelligence tool took the world by storm, Nvidia Corp. has emerged as Wall Street’s preferred pick for traders seeking to profit from its potential.
Don't Get Disoriented by Recession-Talk Fatigue
Investors, economists and journalists have been talking incessantly about recession for the better part of the past year, and they’re all tired of it.
AI Is Improving Faster Than Most Humans Realize
Artificial intelligence advances in a manner that’s hard for the human mind to grasp.
Fed Up: Can the Fed Accommodate the Market?
2022 was a year of disappointment and negative surprises as economies faced the consequences of geopolitical turmoil and central banks fighting inflation.
Stocks Adding to Friday's Rally, Flood of Earnings Data Looms
U.S. stocks are extending a late last-week rally, with Q4 earnings season set to shift into high gear.
CB LEI: 10th Consecutive Decline in December, Recession Signal Continues
The latest Conference Board Leading Economic Index (LEI) for December was down 1% from the November final figure of 111.6, marking the 10th consecutive MoM decline.
Why I’m Waiting for the Fed to Pivot
So far, my 2023 investing looks just like 2022: lots of waiting.
Fortune Doesn’t Always Favor the Bold: The Perils of Concentrated Stock Positions
Advisors can illustrate the risks in single-stock positions by educating their clients on the historical evidence that demonstrates diversification is the prudent strategy.
Margin Debt Down 5.8% in December
FINRA has released new data for margin debt, now available through December. The latest debt level is down 5.77% month-over-month.
Monetary Policy. Is The Fed Trying To Wean Markets Off Of It?
Is the Fed trying to wean the markets off monetary policy?
Slow Change Speeds Up
The world’s leading CEOs, politicians, and various do-gooders were in Davos, Switzerland, this week, discussing ways to solve our collective problems and create opportunities for their own companies. The most important conversations were off the record and many of the public speeches were simply performance art.
Fund Managers Are Betting On China Stocks And Commodities As The Country Reopens
A January survey conducted by Bank of America shows that 91% of money managers believe China will “fully reopen” in 2023. That’s a significant increase from December 2022. Growth expectations for the country are also at a 17-year high.