The Markets

Discussion in 'Political Discussions' started by gipper, May 9, 2022.

  1. BuckeyeT

    BuckeyeT Well-Known Member

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    Yesterday was Fed Minutes Day. The day when the minutes from the most recent FOMC meeting is released, an important day for market and economy geeks like me in that we can a better sense of FOMC mindset and discussion. No real surprises, Powell clearly signaled the pause in hikes earlier, the discussion in the meeting confirmed for us and began to speak about the conditions under which cuts in policy rates would begin, in addition to the pace of unwinding the massive liquidity injections via the Fed's balance sheet and QE.

    “In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves,” the minutes said."

    The much discussed but historically very elusive soft landing scenario remains well within the range of probable outcomes. In light of the sentence above re: path dependent on economy, solid job and unemployment numbers released this morning would suggest the continued strength of the labor market does not portend any rate cuts anytime soon.
     
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  2. BuckeyeT

    BuckeyeT Well-Known Member

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    Federal Reserve issues FOMC statement

    Fun, fun, fun.....Fed Meeting Day! FOMC wraps up it's 2 day January meeting holding rates steady.

    "Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated."

    "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."

    Powell and Co maintaining strong grip on monetary reins even in the face of moderating labor demand. Current market expectations regarding a rate cut are now 50/50 for March meeting after having been as high as 75% at the end of 2023. Almost 100% certainty priced in by the May meeting. Elusive "Soft landing" rapidly becoming the most likely case for many market participants....stay tuned
     
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  3. BuckeyeT

    BuckeyeT Well-Known Member

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    Important day in the markets today as Fed Chair Powell presents his semi-annual Humphrey-Hawkins testimony to Congress. Powell's testimony is always closely watched by market participants for any surprises or any subtle insights into the Fed's thinking, next steps

    Monetary Policy Report – March 2024

    Key Highlights:

    "While inflation remains above the Federal Open Market Committee’s (FOMC) objective of 2 percent, it has eased substantially, and the slowing in inflation has occurred without a significant increase in unemployment."

    "Economic activity expanded at a strong pace over the past year. For 2023 as a whole, gross domestic product increased 3.1 percent, bolstered by solid consumer demand and improving supply conditions."

    "The labor market remains relatively tight, but supply and demand conditions have continued to come into better balance. Since the middle of last year, payroll job gains have averaged 239,000 jobs per month, and the unemployment rate has remained near historical lows, at 3.7 percent."

    "Inflation has eased notably over the past year but remains above the FOMC’s longer-run goal of 2 percent. Total personal consumption expenditures (PCE) prices rose 2.4 percent over the 12 months ending in January. Excluding the volatile food and energy categories, core PCE prices rose 2.8 percent, a notable slowing from 2022 that was widespread across both goods and services prices."

    "We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year."
     
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  4. BuckeyeT

    BuckeyeT Well-Known Member

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    Just as an aside, as I watch more and more of these things through the years, if there is a more irritating Congress-person than Rashida Tlaib, she's at least in a dead heat for first. Insufferable. Not surprised where she comes from....apologies to my friend Bobda :p
     
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  5. Scott88

    Scott88 Well-Known Member

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    Seems the Fed's enthusiasm has dropped some from the beginning of the year. It was thought they would start dropping rates in May... but then the inflation numbers came in higher than they expected. No way to start dropping without throwing gas on that fire.
    The labor market is a joke. There are fewer folks with full time jobs than ever from what I read a few months ago.
    All the "new" jobs this economy creates are part time, and probably a worker's second in an attempt to make ends come close.
     
  6. BuckeyeT

    BuckeyeT Well-Known Member

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    Good thing about the Fed is that they are very transparent and open about their thoughts. My take is they've been in no hurry to begin to lower rates is because there is no need as yet. Tho early, all indications at present suggest the "soft landing" has been achieved in the face of historic tightening. Inflation has been declining tho still above target, the labor market/jobs have remained strong keeping consumer demand and economic growth solid. Unless or until we see some weakness in the labor market, I don't see the Fed anxious to do anything while PCE is above target. Nor should they, imo.

    Re: Labor markets - I've not seen the reports you referenced but would love to see them. Jobs and the labor market are one of the most closely watched and extensively measured of any economic data series. I have yet to see any data along those lines, indeed all the data that I've seen suggest the opposite is true. This labor continues to be in very good shape, historically low unemployment and we still have more open jobs than we do workers. Indeed one of the reasons the Fed remains reluctant to lower rates is that the labor market still remains historically tight.

    With respect to Inflation(PCE - Feds favorite measure):
    Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) | FRED | St. Louis Fed

    With respect to full time jobs:
    Employed, Usually Work Full Time

    With respect to Part-time jobs:
    https://www.advisorperspectives.com...er-look-at-full-time-and-part-time-employment

    Average Weekly Hours of All Employees, Total Private

    There are several key elements that will continue to provide energy to this economy imo. 1) Government spending by way of the Infrastructure and Chip bills and the green energy act aka Inflation Reduction Act (most ridiculous name ever imagined) and everybody is underestimating the impact of AI both at present and going forward. Presently there is a massive amount of investment - $100's of $Billions$ in building out the AI infrastructure. It is driving every sector of our economy and we're still in the early stages. The productivity improvements and innovation will be as massive and ubiquitous as the dawn of the internet and the digital networking. In my view, even moreso. I'm taking the over....don't underestimate this economy, while not without warts, it remains unquestionably the most robust economy in the developed world.
     
  7. Scott88

    Scott88 Well-Known Member

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    I need to dig that data up. It might be old at this point, and I'm not sure where I read it.
    I'll see if I can go down that rabbit hole again and find it.

    I don't underestimate our economy, but I know how much cash has been injected into it, and the reduction doesn't seem to have been nearly enough to me.

    What I'd dearly like to see is a reduction in the Fed Govt size. Being the biggest employer in the country doesn't lend itself well to shrinking tho...
     
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  8. BuckeyeT

    BuckeyeT Well-Known Member

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    On that we are 100% agreed....if there is anything that I could take issue with with respect to our current economy it's that there is more federal stimulus in the sails than I would like. I'd much rather not have federal funding being as large a factor in fueling growth. Organic, private sector investment, e.g. AI infrastructure spending, is far and away the better input and we are on the leading edge in that department
     
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  9. Bobdawolverweasel

    Bobdawolverweasel Well-Known Member

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    If you want to get a true understanding of the economic devastation that took place in the Midwest, look at who were the most prosperous cities in America 75 years ago.

     
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  10. Terry O'Keefe

    Terry O'Keefe Well-Known Member Administrator

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    That's amazing, not a single Southern City to be found. I wonder what a current list would look like.
     
  11. BuckeyeT

    BuckeyeT Well-Known Member

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    Speaks clearly to the vibrance of the industrial wartime/automobile economy and subsequent demise. Youngstown, Akron, Dayton, Toledo....wow. Steel, glass and rubber. Population of those areas peaked in the early 70's and has declined gradually since as foreign auto and steel makers began to dominate.

    Speaking of markets, all eyes will be on the 2 day FOMC meeting which begins today. Current consensus is gradual easing beginning in June with 3 rate cuts by year end. All bets off if labor markets begin to show material weakness or price pressures take an unexpected turn. Best case is no surprises
     
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  12. Bobdawolverweasel

    Bobdawolverweasel Well-Known Member

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    Terry, list for 2021. From wealth concentrated in the Midwest to zero Midwestern cities on the list.

     
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  13. Terry O'Keefe

    Terry O'Keefe Well-Known Member Administrator

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    Still no Southern cities, I am really surprised. Shift was to the West Coast.

    What is going on in Manchester, NH?
     
  14. Scott88

    Scott88 Well-Known Member

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    Cost of living is still less down south, so wages per capita didn't go through the roof... yet.
     
  15. BuckeyeT

    BuckeyeT Well-Known Member

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    Refugees from Boston ;)
     
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  16. Sid

    Sid Well-Known Member

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    That essentially was my reaction to the use of median household income alone as the measure. Yes, the midwest has fallen out of the median household income "race", but the average cost of living here is far below those leading cities in the 2021 study. I'd guess it balances out.
     
  17. Scott88

    Scott88 Well-Known Member

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    My first thought was that most of the folks flipping burgers in many of those Cali cities probably make more than I do, but live in a small apartment or tiny house because they have to.
    I've got a ranch. :D
     
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  18. BuckeyeT

    BuckeyeT Well-Known Member

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    True that....my son recently moved from San Diego to Charlotte. Moved into an apartment 2x the size of his Cali crib, approx 1/2 the rent. Same company, same salary, no $6/gal gas.....=> big score for him
     
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  19. BuckeyeT

    BuckeyeT Well-Known Member

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    Fed adjourns March FOMC meeting holding rates steady, no surprises.

    "Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated."

    They also released their much watched Summary of Economic Projections (SEP) - still anticipating 3 rate cuts this year beginning June but consensus is stronger growth forecast and lower unemployment for 2024 than previous projections. It seems the Fed's happy, initial indications show that the market's happy and if the market's happy, I'm happy. :)

    Federal Reserve issues FOMC statement
    https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240320.pdf
     
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  20. Scott88

    Scott88 Well-Known Member

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    We'll see.
    I'm a natural skeptic, and I have some reservations that lowering rates will allow inflation to stay stable, much less go lower...
     
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