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Market Commentary

April 2019 Monthly Market Commentary

Back to the Future: 2% Growth


As advertised, the brutal headwinds that buffeted the U.S. economy late last year are having knock-on effects in the early months of 2019. To be sure, the economy’s performance in the closing quarter of 2018 does not look bad at all as GDP advanced by a respectable 2.6 percent annual rate, according to the Government's preliminary estimate. That capped a full-year growth rate of 2.9 percent, which ties it for the fastest pace since 2005. But the year ended on a downbeat note amid escalating trade tensions, the start of a 35-day government shutdown, a debilitating plunge in stock prices that wiped out nearly $4 trillion in household net worth, and rising interest rates, fueled by fears that the Federal Reserve was tightening policy too aggressively.

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Weekly Market Commentary

May 20, 2019


The data calendar filled up this week and the results were nothing to write home about – but nothing to get too concerned over. Yes, growth is poised to slow from the surprisingly robust 3.2 percent annual rate set in the first quarter. That much was established the moment the ink was dry on the preliminary GDP report, which revealed that the period’s strength came mostly from unsustainable sources, notably inventories and trade. Both will be drags in the current quarter, more than offsetting an expected pickup in the economy’s main growth drivers – consumer and business investment spending.

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Weekly Market Commentary

May 13, 2019


Constructive comments on trade negotiations by government officials late in the week rescued the stock market from a potential meltdown. That said, no deal with China was struck by the end of the week, and a big hike in tariffs is on the books. The Trump administration may be emboldened by the strong economy to make a risky bet on tariffs. Recent reports support that perception, as the economy’s underpinnings remain solid. There is little sign that the job market is about to roll over; job vacancies remain high and the competition for workers is intense.

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Weekly Market Commentary

May 6, 2019


For the second consecutive week, the government released a key economic report that blew past expectations. Following last week’s GDP estimate, which revealed an above-consensus 3.2 percent growth rate in the first quarter, the Labor Department on Friday reported that the economy generated far more jobs in April than had been expected. But whereas the GDP report had shaky underpinnings, including soft readings on consumer and business spending, the monthly employment report had a muscular foundation. As usual, the details exposed a soft underbelly in some areas, but they should not detract from the surprisingly robust reading of the headline 263 thousand gain in payrolls or the 0.2 percent drop in the unemployment rate to a fresh 49-year low of 3.6 percent.

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Weekly Market Commentary

April 29, 2019


The U.S. economy increasingly resembles Wile E. Coyote, the Looney Tunes character who briefly stays aloft after running off a cliff. Of course, the Coyote abruptly descends into a cloud of dust when he realizes the floor below has vanished. A similar fate may occur in the real world of GDP statistics, which this morning tracked an economy that was propped up by thin air in the first quarter. On Friday, the Commerce Department reported that gross domestic product increased by a 3.2 percent annual rate during the period, blowing through virtually all expectations but greatly exaggerating the economy’s underlying strength.

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Weekly Market Commentary

April 22, 2019


Resilience has been the hallmark of the U.S. economy since the Great Recession. That impressive feature continues to be on full display. Since the recovery began in mid-2009, a number of headwinds have threatened to derail the upturn, including a sovereign debt crisis, a double-dip recession in Europe, two government shutdowns and more recently, the escalation of trade tensions and a sharp stock-market correction. Through it all, the domestic economy bent but refused to break. Once again, recession fears reared its head early in the year, and once again they are proving to be misguided.

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Weekly Market Commentary

April 15, 2019


Perceptions are slowly but steadily shifting again in the financial markets. Throughout most of the first quarter, recession fears escalated amid a slew of disappointing economic data, an abrupt dovish turn by the Federal Reserve and slowing global growth, paced by greater-than-expected weakness in Europe and China. Recession odds peaked with the inversion of the yield curve in March, when the 10-year Treasury yield plunged by nearly a full percentage point below its early-November peak. The stock market eluded the negativity associated with the grimmer outlook, bouncing back from a severe correction late last year – which many analysts felt was overblown – and rallying on robust earnings reports in 2018. But even here, talk of an earnings recession this year has recently gained traction and analysts have been sounding a more bearish tone.

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Weekly Market Commentary

April 8, 2019


Some significant pairings caught our attention this week – President Trump and Chinese Vice Premier Liu He (striving for a trade deal); Theresa May with Jeremy Corbyn (reaching for a Brexit resolution); and Bryce Harper and Washington National fans (upset that he left for Philly money). All participants approached their get-togethers with suspicion, borne largely of mistrust, but all realized that the stakes were high. Of the three, only Harper’s blast into the upper decks produced a resolution, at least for the near term. As for the others, scores have yet to be settled.

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Weekly Market Commentary

April 1, 2019


With the government’s latest GDP revision, the handoff to the first quarter just got weaker as the 2.6 percent growth rate previously reported for the fourth quarter has been reduced to 2.2 percent. Taken at face value, this is not terrible news; it merely brings the growth trajectory of the U.S. economy back to the average pace seen throughout the expansion. But as they say in football, it’s momentum that carries the day and Big Mo has moved to the sidelines. Not surprisingly, the fans are in an uproar, screaming that a recession is just around the corner. What’s more, some believe the team leaders, captained by Fed chair Powell, may have had a big hand in bringing an unceremonious end to the growth season.

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