Market turbulence? Check. Heightened concerns about economic growth—globally and for the US? Check. Does this mean that the Fed won’t raise interest rates this year? Not necessarily. Or so Fed Chair Janet Yellen intimated in a speech today. A slowdown in China’s growth rate and a mixed bag of numbers for the US lead some (many?) economists to conclude that it’s not a good time to start squeezing monetary policy. But Yellen has a different view. Sure, she may have surprised the crowd with the no-hike decision at last week’s FOMC meeting–a decision that was widely interpreted as the Fed’s way of saying that the future looked a bit dicey. But don’t confuse last week’s Yellen with today’s Janet.
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Daily Archives: September 24, 2015
Chicago Fed: US Growth At Slightly Above-Trend Pace In August
US economic activity in August increased at a pace that’s fractionally above the historical trend, according to this morning’s update of the Chicago Fed National Activity Index’s three-month average (CFNAI-MA3). Last month’s reading of +0.01 ticked down from July’s revised +0.02 level, but both numbers reflect an upbeat macro trend.
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The US Stock Market’s Bearish Forecast
Making the case for optimism isn’t getting any easier. Although the broad US macro trend is still positive, Mr. Market has lost his mojo. In fact, one econometric technique for gauging the state of the US equity market advises that a bear market has recently started. It could be a false warning, of course, but for the moment it’s clear that market risk has popped up. The main reason for reserving judgment: US economic growth is still positive. There are cracks, but a tailwind is still blowing. The caveat is that economic numbers arrive with a lag. Does the market know something that’s not yet reflected in the hard macro data? Maybe, although Mr. Market’s track record on forecasting the business cycle isn’t flawless.
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Initial Guidance | 24 September 2015
● US Mfg PMI unchanged at 53.0 in Sep, slowest growth in 22 mos | Markit
● US mortgage apps surge 13.9% in week through Sep 19 | CNBC
● VW scandal poses risks for German economy | Reuters
● Japan Mfg PMI ticks lower, close to neutral rate: 50.9 | Markit
● German business confidence (Ifo) improves in Sep | RTT
● Consumer confidence (Gfk) in Germany eases | Reuters