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Market Commentary

July 2019 Monthly Market Commentary

Time to Celebrate?


The U.S. economy is celebrating an important milestone this month, having entered the longest expansion in its history. According to the National Bureau of Economic Research - the official arbiter that identifies the beginning and end of business cycles-the Great Recession ended in June 2009, making this July the 121st month of growth, surpassing the previous longest stretch of 120 months during the 1991 to 2000 expansion. To be sure, we won’t know with certainty if the economy is still in its growth phase for a while. The NBER takes its sweet time gathering all the information needed to identify cyclical turning points.

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Weekly Market Commentary

July 15, 2019


Fed Chair Powell has improved his communication skills since last October when he inadvertently commented that the federal funds rate was a “long way from neutral.” Having to walk back that gaffe a few weeks later, Powell has since committed few, if any, verbal mishaps that roiled the financial markets as much as it did then. That said, the Fed chief might be better served by focusing more on the forest than the trees when providing policy guidance to the markets. For the past several weeks, Powell has been diligently making the case for a rate cut, noting the need to inoculate the economy against the downside risks associated with numerous headwinds that are gathering force. These include slowing global activity, uncertainty regarding trade developments, high debt ratios, the persistence of low inflation and signs of weaker job growth.

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Weekly Market Commentary

July 8, 2019


Once again, fears that the expansion was on its last legs are turning out to be unfounded. Following a lackluster jobs report for May – which stoked those fears as well as the widespread view that the Fed would need to come to the rescue with an imminent rate cut – the Labor Department reported on Friday that the economy generated a robust 224,000 jobs in June. That was well above expectations of a 165,000 gain and dwarfs the downwardly revised 72,000 payroll increase in May. To be sure, monthly numbers can be noisy, but smoothing out changes over three and six-month periods shows that job growth is averaging about 170,000 a month – modestly slower than the 192,000 average over the past 12 months, but still a healthy pace that is consistent with an enduring expansion.

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Weekly Market Commentary

July 1, 2019


The financial markets spent the week biding time in anticipation of the G-20 summit in Japan this weekend, when President Trump and his counterpart, Xi Jinping of China, will hold trade talks that hopefully defuses tensions between the world’s two largest economies. On a positive note, several American officials expressed optimism that the two sides were close to a deal, one that would prevent the growth-damaging tit-for-tat tariffs that have been roiling the markets for months. On the negative side, it is hard to ignore the fact that we have heard this before – many times – with nothing to show for it.

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Weekly Market Commentary

June 24, 2019


The Federal Reserve took center stage this week, raising the curtain on a drama that had been building to a feverish pitch in recent weeks. For the most part, the reviews of the policy meeting that concluded on Wednesday were favorable. True, President Trump, as expected, gave it a thumbs down, as the central bank refused to go along with his repeated demand to lower interest rates. But even the president has to be pleased with the aftermath of the Fed’s decision as the stock market gave it a resounding thumbs up, rallying to a record high the day after the meeting. And while, the Fed kept its policy rate unchanged in a range of 2.25-2.50 percent, the capital markets sent yields tumbling, with the bellwether 10-year Treasury yield briefly falling below 2.0 percent on Thursday for the first time since November 2016 before climbing back above it on Friday.

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Weekly Market Commentary

June 17, 2019


The financial markets are anxiously awaiting two critical events next week – the Federal Reserve policy meeting and the G7 Summit when President Trump and China’s President Xi will hopefully meet and strive to defuse escalating trade tensions between the world’s two largest economies. Needless to say, there is much at stake in the outcomes of these confabs. Over the past several weeks, the markets have been deeply embroiled in speculation regarding the upcoming FOMC meeting, with the consensus steadily moving towards the belief that the policy makers will signal a rate cut sooner rather than later.

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Weekly Market Commentary

June 10, 2019


Just a few weeks ago the general perception was that the upcoming FOMC meeting on June 18-19 would be a ho-hum affair, with Fed officials retaining the wait-and-see strategy conveyed at the previous confab held in late April. Recall that the central bank was pulled in opposite directions at that meeting, as inflation was running below expectations but the economy was performing somewhat better, showing considerable momentum heading into the second quarter. That conflicting backdrop underscored the “patient” attitude adopted by the Fed, which was generally accepted by the financial markets; following the meeting, traders and investors gave about even odds that the next rate move could be either up or down.

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Weekly Market Commentary

June 3, 2019


Pressure on the Fed to cut rates is intensifying. The economy is weakening more than expected, inflation remains quiescent and the financial markets are sounding a downbeat note. Consumer spending stagnated in April, following an outsize increase in March. Other data are also coming in below expectations, causing widespread cutbacks in second-quarter growth estimates. The Fed remains steadfast for now. But if trade tensions escalate and the White House follows through with its latest tariff threat against Mexico, the odds of a rate cut – and a possible recession – will increase exponentially.

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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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