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Technical Market Report for April 29, 2017

The Wall Street bull is seen in the financial district in New York, U.S., March 7, 2017. REUTERS/Brendan McDermid

Technical Market Report for April 29, 2017

By: Mike Burk | Sat, Apr 29, 2017


The good news is:
• The NASDAQ composite (OTC) and the Russell 2000 (R2K) both hit all time highs last week.

The market had another good week.

New highs increased, new lows remained insignificant, while the secondaries outperformed the blue chips and volume picked up.

The Negatives

The market is over bought. The major indices are up 2.5% – 4.5% in the past 2 weeks.

The first chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH moved sharply upward last week, but was far from confirming the new index high.

OTC and OTC NH

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.

The pattern is similar to the chart above.

SPX and NY NH

The Positives

The secondaries outperformed the blue chips and new lows remained at non threatening levels.

The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio), in red. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

OTC HL Ratio rose finishing the week at a very strong 81%.

OTC and OTC HL Ratio

The next chart is similar to the one above one except it shows the SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio rose to finish the week at a very strong 89%.

SPX and NY HL Ratio

Seasonality

Next week includes the first 5 trading days of May during the 1st year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.

OTC data covers the period from 1963 to 2016 while SPX data runs from 1928 to 2016. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

Average returns for the coming week have been much stronger during the 1st year of the Presidential Cycle than average of all years.

The OTC has not had a down year for this period since 1981 and the SPX since 1989.

Report for the first 5 days of May.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 1
Day1 Day2 Day3 Day4 Day5 Totals
1965-1 0.27% 1 -0.04% 2 0.31% 3 0.04% 4 0.13% 5 0.72%
1969-1 0.26% 4 0.12% 5 0.34% 1 0.19% 2 -0.38% 3 0.53%
1973-1 0.10% 2 1.01% 3 0.70% 4 0.98% 5 -0.37% 1 2.42%
1977-1 0.37% 1 0.40% 2 0.44% 3 0.27% 4 0.01% 5 1.48%
1981-1 -0.03% 5 -1.55% 1 -0.83% 2 0.20% 3 0.79% 4 -1.41%
1985-1 -0.33% 3 -0.22% 4 0.47% 5 -0.16% 1 0.37% 2 0.12%
1989-1 -0.02% 1 0.13% 2 0.19% 3 0.09% 4 0.35% 5 0.74%
1993-1 0.80% 1 1.72% 2 0.75% 3 -0.47% 4 0.21% 5 3.00%
Avg 0.16% 0.09% 0.20% -0.01% 0.35% 0.79%
1997-1 0.77% 4 2.74% 5 2.60% 1 -0.81% 2 -0.41% 3 4.89%
2001-1 2.46% 2 2.42% 3 -3.35% 4 2.11% 5 -0.82% 1 2.82%
2005-1 0.36% 1 0.23% 2 1.51% 3 -0.02% 4 0.28% 5 2.36%
2009-1 0.11% 5 2.58% 1 -0.54% 2 0.28% 3 -2.44% 4 0.00%
2013-1 -0.89% 3 1.26% 4 1.14% 5 0.42% 1 0.11% 2 2.04%
Avg 0.56% 1.84% 0.27% 0.40% -0.65% 2.42%
OTC summary for Presidential Year 1 1965 – 2013
Averages 0.33% 0.83% 0.29% 0.24% -0.17% 1.52%
% Winners 69% 77% 77% 69% 62% 92%
MDD 5/3/2001 3.35% — 5/7/2009 2.68% — 5/5/1981 2.39%
OTC summary for all years 1963 – 2016
Averages 0.33% 0.16% 0.02% -0.08% -0.08% 0.35%
% Winners 64% 69% 58% 54% 56% 61%
MDD 5/7/2010 9.33% — 5/7/2002 6.78% — 5/3/2000 6.34%
SPX Presidential Year 1
Day1 Day2 Day3 Day4 Day5 Totals
1929-1 0.19% 3 0.46% 4 1.00% 5 0.42% 6 -0.60% 1 1.46%
1933-1 1.32% 1 0.36% 2 -0.59% 3 2.85% 4 1.04% 5 4.98%
1937-1 0.00% 6 0.24% 1 1.58% 2 -0.84% 3 0.72% 4 1.71%
1941-1 -0.11% 4 0.32% 5 0.21% 6 -0.11% 1 1.71% 2 2.04%
1945-1 -0.34% 2 -0.14% 3 0.68% 4 0.34% 5 0.20% 6 0.74%
1949-1 0.27% 1 0.47% 2 1.14% 3 -0.07% 4 -0.60% 5 1.22%
1953-1 0.45% 5 1.09% 1 0.12% 2 -0.12% 3 -0.40% 4 1.14%
Avg 0.05% 0.40% 0.75% -0.16% 0.33% 1.37%
1957-1 0.61% 3 0.80% 4 -0.11% 5 -0.15% 1 -0.30% 2 0.85%
1961-1 -0.21% 1 0.72% 2 0.82% 3 0.39% 4 0.12% 5 1.84%
1965-1 0.13% 1 0.31% 2 0.22% 3 0.23% 4 -0.08% 5 0.83%
1969-1 -0.17% 4 0.47% 5 0.36% 1 0.47% 2 -0.18% 3 0.94%
1973-1 0.12% 2 1.24% 3 1.65% 4 0.71% 5 -0.42% 1 3.30%
Avg 0.10% 0.71% 0.59% 0.33% -0.17% 1.55%
1977-1 0.50% 1 0.51% 2 0.53% 3 0.15% 4 -0.62% 5 1.07%
1981-1 -0.07% 5 -1.54% 1 -0.27% 2 0.35% 3 0.68% 4 -0.85%
1985-1 -0.81% 3 0.36% 4 0.60% 5 -0.05% 1 0.43% 2 0.52%
1989-1 -0.17% 1 -0.32% 2 0.01% 3 -0.13% 4 -0.05% 5 -0.66%
1993-1 0.52% 1 0.36% 2 0.11% 3 -0.28% 4 -0.21% 5 0.48%
Avg -0.01% -0.13% 0.20% 0.01% 0.04% 0.11%
1997-1 -0.35% 4 1.81% 5 2.13% 1 -0.31% 2 -1.47% 3 1.82%
2001-1 1.36% 2 0.08% 3 -1.49% 4 1.44% 5 -0.24% 1 1.15%
2005-1 0.46% 1 -0.09% 2 1.25% 3 -0.26% 4 -0.11% 5 1.25%
2009-1 0.54% 5 3.39% 1 -0.38% 2 1.74% 3 -1.32% 4 3.97%
2013-1 -0.93% 3 0.94% 4 1.05% 5 0.19% 1 0.52% 2 1.78%
Avg 0.21% 1.23% 0.51% 0.56% -0.52% 1.99%
SPX summary for Presidential Year 1 1929 – 2013
Averages 0.15% 0.54% 0.48% 0.32% -0.05% 1.44%
% Winners 55% 82% 77% 55% 36% 91%
MDD 5/5/1981 1.87% — 5/7/1997 1.77% — 5/3/2001 1.49%
SPX summary for all years 1928 – 2016
Averages 0.12% 0.16% 0.19% -0.06% 0.14% 0.55%
% Winners 55% 68% 63% 44% 49% 66%
MDD 5/3/1930 8.27% — 5/7/2010 7.60% — 5/4/2000 4.01%

May

Since 1963, over all years, the OTC in May has been up 61% of the time with an average gain of 0.6%. During the 1st year of the Presidential Cycle the OTC in May has been up 77% of the time with an average gain of 2.7% (helped considerably by a 11.1% gain in 1997). The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in May over all years since 1963, while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

OTC May, All, Year 1 1963-2017

Since 1928 the SPX has been up 57% of the time in May with an average loss of 0.1%. During the 1st year of the Presidential Cycle the SPX has been up 59% of the time with an average gain of 1.6%. The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in May in red and the average daily performance during the 1st year of the Presidential Cycle, over the same period, in green.

SPX May, All, Year 1 1928-2017

Since 1979 the Russell 2000 (R2K) has been up 66% of the time in May with an average gain of 1.4%. During the 1st year of the Presidential Cycle the R2K has been up 100% of the time with an average gain of 4.6%. The best May ever for the R2K 1997 (+11.0%), the worst 2010 (-7.7%)

The chart below is similar to those above except it shows the average daily performance of the R2K over all years since 1979 in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.

Russell 2000 May, All, Year 1 1979-2017

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 52% of the time in May with an average loss of -0.1%. During the 1st year of the Presidential Cycle the DJIA has been up 58% of the time in May with an average gain of 0.9%. The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in May in grey and the average performance during the 1st year of the Presidential Cycle in green.

Dow Industrials May, All, Year 1 1885-2017

Conclusion

The market continued its rally last week and seasonally next week is strong.

I expect the major averages to be higher on Friday May 5 than they were on Friday April 28.

These reports are archived at: http://www.safehaven.com/

Good Luck,
YTD W 6 / L 7 / T 4


Mike Burk

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron’s and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
notice.

Copyright © 2003-2017 Mike Burk

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com
Published at Sat, 29 Apr 2017 09:21:46 +0000

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Schedule for Week of Apr 30, 2017

FILE PHOTO: A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. REUTERS/Andrew Kelly/File Photo

Schedule for Week of Apr 30, 2017

by Bill McBride on 4/29/2017 08:12:00 AM

The key report this week is the April employment report on Friday.

Other key indicators include the April ISM manufacturing and non-manufacturing indexes, April auto sales, and the March Trade Deficit.

—– Monday, May 1st —–

8:30 AM: Personal Income and Outlays for March. The consensus is for a 0.3% increase in personal income, and for a 0.1% increase in personal spending. And for the Core PCE price index to be unchanged.ISM PMI10:00 AM: ISM Manufacturing Index for April. The consensus is for the ISM to be at 56.5, down from 57.2 in March.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion at 57.2% in March. The employment index was at 58.9%, and the new orders index was at 64.5%.

10:00 AM: Construction Spending for March. The consensus is for a 0.5% increase in construction spending.

—– Tuesday, May 2nd —–

Vehicle SalesAll day: Light vehicle sales for April. The consensus is for light vehicle sales to increase to 17.2 million SAAR in April, from 16.6 million in  March (Seasonally Adjusted Annual Rate).This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the March sales rate.

—– Wednesday, May 3rd —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in April, down from 263,000 added in March.

10:00 AM: the ISM non-Manufacturing Index for April. The consensus is for index to increase to 55.8 from 55.2 in March.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

—– Thursday, May 4th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 246 thousand initial claims, down from 257 thousand the previous week.U.S. Trade Deficit8:30 AM: Trade Balance report for March from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through January. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $44.5 billion in March from $43.6 billion in February.

10:00 AM: Manufacturers’ Shipments, Inventories and Orders (Factory Orders) for March. The consensus is a 0.4% increase in orders.

—– Friday, May 5th —–

8:30 AM: Employment Report for April. The consensus is for an increase of 185,000 non-farm payroll jobs added in April, up from the 98,000 non-farm payroll jobs added in March.The consensus is for the unemployment rate to increase to 4.6%.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In March, the year-over-year change was 2.13 million jobs.

A key will be the change in wages.

3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $15.6 billion increase in credit.

Published at Sat, 29 Apr 2017 12:12:00 +0000

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U.S. first quarter growth weakest in three years as consumer spending falters

by Pexels from Pixabay

U.S. first quarter growth weakest in three years as consumer spending falters

By Lucia Mutikani| WASHINGTON

The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled, but a surge in business investment and wage growth suggested activity would regain momentum as the year progresses.

The soft patch at the start of the year is bad news for the Trump administration’s ambitions to significantly boost growth.

“It marks a rough start to the administration’s high hopes of achieving 3 percent or better growth; this is not the kind of news it was looking for to cap its first 100 days in office,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

Gross domestic product increased at a 0.7 percent annual rate also as the government further cut defense spending and businesses spent less on inventories, the Commerce Department said on Friday in its advance estimate. That was the weakest performance since the first quarter of 2014.

The pedestrian first-quarter growth pace is, however, not a true picture of the economy’s health. Wage growth in the first quarter was the fastest in 10 years as the labor market nears full employment and business investment on equipment was the strongest since the third quarter of 2015.

Also underscoring the economy’s underlying strength, consumer and business confidence are near multi-year highs. First-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

Prices for U.S. Treasuries were narrowly mixed. The dollar was little changed while U.S. stocks were trading marginally lower.

President Donald Trump has pledged to raise annual growth to 4 percent through infrastructure spending, tax cuts and deregulation. On Wednesday, the White House proposed a tax plan that includes cutting the corporate income tax rate to 15 percent from 35 percent, but offered no details.

 

WAGE GROWTH ACCELERATING

Economists are skeptical that fiscal stimulus, if it materializes, will fire up the economy given weak productivity and labor shortages in some areas. They see growth just above 2 percent this year.

“The cupboard is bare when companies need to hire skilled labor. You can’t build American if you can’t find any American workers to put on your shop floor,” said Christopher Rupkey, chief economist at MUFG Union Bank in New York.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.3 percent rate, the slowest pace since the fourth quarter of 2009. That followed the fourth quarter’s robust 3.5 percent growth rate.

A mild winter undercut demand for heating and utilities production. Higher inflation, with the personal consumption expenditures price index averaging 2.4 percent – the highest since the second quarter of 2011 – was also a drag.

Spending also took a hit from government delays issuing income tax refunds to combat fraud.

In a separate report on Friday, the Labor Department said private sector wages jumped 0.9 percent in the first quarter, the largest increase in a 10 years, after rising 0.5 percent in the fourth quarter.

With wage growth, business investment and inflation firming, economists believe Federal Reserve officials will look past the weak first-quarter GDP when they meet next week.

Fed Chair Janet Yellen has previously described quarterly GDP as “noisy.” The U.S. central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year. It is not expected to raise interest rates next Wednesday.

“There is enough reason to doubt the growth slowdown for the Fed to stay the course on tightening, especially with a bigger-than-expected pop in employment costs,” said Chris Low, chief economist at FTN Financial in New York.

Businesses accumulated inventories at a rate of $10.3 billion in the last quarter, down from $49.6 billion in the October-December period. Inventories subtracted 0.93 percentage point from GDP growth.

Government spending on defense declined at a 4.0 percent pace, the biggest fall since the fourth quarter of 2014 and second quarterly drop.

Business spending on equipment accelerated at a 9.1 percent rate in the first quarter thanks to rising oil prices. Spending on mining exploration, wells and shafts surged at a record 449 percent rate. That led to spending on nonresidential structures rebounding at a 22.1 percent pace, the fastest in three years.

Investment in home building increased for a second quarter while rising exports narrowed the trade deficit.

 

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

 

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Goldman: U.S. Economy “now at full employment”

Goldman: U.S. Economy “now at full employment”

by Bill McBride on 4/28/2017 10:03:00 PM

A few excerpts from a note by Goldman Sachs economists Jan Hatzius and Daan Struyven:

On a broad range of measures, the US economy is now at full employment. Headline unemployment has fallen below most estimates of the structural rate, the discouraged worker share is back to pre-recession lows, and the still somewhat elevated share of involuntary part-timers is arguably structural.

And while the employment/population ratio remains well below its pre-recession level, the gap is fully explained by a combination of population aging and declining participation of prime-age men. This trend among prime-age men has continued for over six decades, has not stood in the way of a strong recent wage acceleration in that demographic, and therefore looks structural.

Job growth remains well above the pace needed to stabilize unemployment. The speed of the likely overshoot is comparable to the average postwar cycle, and we have lowered our end-2018 unemployment rate forecast to 4.1% from 4.3% prior.
emphasis added

Published at Sat, 29 Apr 2017 02:03:00 +0000

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Wall Street little changed with eyes on earnings

Photo

Wall Street little changed with eyes on earnings

By Yashaswini Swamynathan

U.S. stocks were little changed on Thursday amid a flood of quarterly earnings reports, while investors assessed President Donald Trump’s tax reform plan.

The one-page plan, unveiled on Wednesday, proposed deep tax cuts for many businesses, but offered no detail on how it would be paid for without increasing the deficit.

U.S. stocks snapped a two-day rally to end lower on Wednesday after the plan was unveiled. The prospects of hefty tax cuts have been a major driver of the post-election rally since November.

“Yesterday, you saw some selling but it didn’t develop into an outright heavy pressure day,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

At 9:38 a.m. ET (1338 GMT), the Dow Jones Industrial Average .DJI was up 11.43 points, or 0.05 percent, at 20,986.52, the S&P 500 .SPX was up 0.14 points, or 0.01 percent, at 2,387.59 and the Nasdaq Composite .IXIC was up 6.55 points, or 0.11 percent, at 6,031.78.

Six of the 11 major S&P 500 sectors were higher, lead by a 0.35 percent gain in the technology index .SPLRCT. PayPal (PYPL.O) jumped to an all-time high of $47.50 after the company raised its full-year earnings forecast.

However, a more than 2 percent drop in oil prices weighed on the energy sector .SPNY, which fell 0.8 percent.

Investors are keeping a close watch on the first-quarter earnings season to gauge fundamental performance in the face of lofty valuations.

Of the 181 S&P 500 companies that have released results so far, nearly 77 percent have reported earnings above analysts’ expectations. In a typical quarter, about 64 percent of the companies top earnings estimates, according to Thomson Reuters I/B/E/S.

Comcast (CMCSA.O) was the top stock on the S&P, with a 3 percent increase after the company’s profit beat analysts’ estimates on strong subscriber growth.

Under Armour (UAA.N) jumped 7.7 percent after the sportswear maker posted a smaller-than-expected quarterly loss.

Bristol-Myers (BMY.N) was up 2.4 percent after the drugmaker reported better-than-expected first-quarter earnings and a jump in revenue.

American Airlines (AAL.O) tumbled 8.1 percent after the company said it had deferred the delivery of several Boeing and Airbus jets, in the latest sign of oversupply in the market for long-distance airliners. The news dragged down shares of other U.S. carriers, including Delta (DAL.N) and United Continental (UAL.N).

Microsoft (MSFT.O), Amazon.com (AMZN.O) and Google parent Alphabet (GOOGL.O) are scheduled to report results after the bell.

Declining issues outnumbered advancers on the NYSE by 1,274 to 1,236. On the Nasdaq, 1,207 issues rose and 1,009 fell.

The S&P 500 index showed 39 52-week highs and no lows, while the Nasdaq recorded 72 highs and 11 lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)
Published at Thu, 27 Apr 2017 13:54:33 +0000

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1st Quarter GDP Estimates: ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit

1st Quarter GDP Estimates: ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit

By: Mike Shedlock | Tue, Apr 25, 2017


On Friday, April 28, the BEA will release its preliminary estimate for first
quarter GDP.

Prior to that release, here is a compilation of six estimates from ZeroHedge,
GDPNow, Nowcast, ISM, Markit, and me.

GDPNow Forecast: 0.5 Percent — April 18, 2017

GDPNow

FRBNY Nowcast: 2.8 Percent — April 21, 2017

FRBNY Nowcast

Model Flaws

  1. Nowcast uses no hard auto data: This is a serious error. Autos account
    for 20% of retail sales and fleet sales are also very important.
  2. Nowcast has an incorrect reliance on unemployment rate: People dropping
    out of the labor force and actual employment rising can both move the number
    in the same direction. Both things cannot mean the same thing.
  3. ISM vs PMI: Both reports measure the same thing, yet those reports signal
    very different things. At least one of them is wrong. GDPNow and Nowcast
    both rely on ISM even though the PMI reports have been more accurate, at
    least recently.
  4. The GDPNow and Nowcast models both suffer from an inability to think. The
    weather provides a nice example. In December, the weather was unusually cold,
    causing Industrial Production numbers to soar (heat and electric production),
    for the entire upcoming quarter. I estimated in advance, January would take
    away those numbers. My assertion played out, at least for GDPNow. I still
    cannot account for Nowcast.

ISM vs PMI

I discussed the difference between ISM and Markit’s PMI estimates recently,
for both manufacturing and non-manufacturing (services).

On April 3, the ISM made this statement: “The past relationship between
the PMI® and the overall economy indicates that the average PMI® for
January through March (57 percent) corresponds to a 4.3 percent increase
in real gross domestic product on an annualized basis.”

On March 24, Chris Williamson, Markit Chief Business Economist, stated
The survey readings are consistent with annualized GDP growth of
1.7% in the first quarter, down from 1.9% in the final quarter of last year
.”

On April 5, Williamson reiterated “The surveys of manufacturing and services
are running at levels consistent with GDP expanding by 1.7% in the first quarter.”

On April 21, Williamson stated “The PMI data suggest the US economy lost further
momentum at the start of the second quarter. The surveys are signaling a GDP
growth rate of 1.1% after 1.7% in the first quarter.”

For discussion, please see ISM-PMI
Divergence Widens: Markit Estimates 2nd Quarter GDP at 1.1%, Says Profit
Squeeze Underway
.

ZeroHedge April 25 Estimate

On April 25, ZeroHedge replied to my request for a number with “Ok sure,
put me down for 0.8%.”

He provided no further explanation, but I did not ask for any.

Mish Estimate History

  • On Monday, April 3, on Coast-to-Coast, live syndicated talk radio,
    I told George Noory I expected GDP would be 0.6%.
  • I lowered that to 0.4% following retail sales reports on April 14, as noted
    in GDP
    Forecasts Dip Again
  • Following the existing and new home sales reports this week, I up my forecast
    to 0.7%.

GDP Predictions

  1. GDPNow April 18: 0.5%
  2. Mish April 25: 0.7%
  3. ZeroHedge April 25: 0.8%
  4. Markit April 21: 1.7%
  5. FRBNY Nowcast April 21: 2.7%
  6. ISM April 3: 4.3%

The “advance” GDP number for the first quarter comes out on April 28.

What About Rate Hikes?

Whether this is yet another “transitory” period remains to be seen,
but one of these downturns will stick.

Three hikes may not sound like much, but there is over a trillion dollars
worth of debt that needs to roll over soon, at increasing rates, at a time
when consumers are gasping and minimum wages hikes are in play.

The market expects another hike in June and still more hikes later in the
year. I sure don’t.

For a look at how the weather impacted factory utilization and thus GDP estimates,
please consider Formulas
Don’t Think: Investigating Weather-Related GDP
.

In that article, I commented on cold weather in December followed by warmer
than usual weather in January.

For reasons I do not understand, GDPNow followed my model of unwinding the
weather-related effects, but Nowcast didn’t.

Meanwhile, Don’t
Worry Weakness is Transitory: Fed Expects a Second Quarter Rebound, Higher
Equity Prices
.

Final Comments

The GDPNow estimate is subject to change on Thursday, April 27 following Durable
Goods and International Trade data. I may tweak my estimate at that time and
will let ZeroHedge do the same, but I expect no more than a 0.2 percentage
point move.

For the first time all quarter, I have a higher estimate than GDPNow. Housing
data caused me to up my estimate up by 0.3 percentage points since mid-April.

If the Fed can convince the market it will hike, the Fed will hike in June.
That may be a tough act if first-quarter GDP is under 1%.


Mike Shedlock

Mike Shedlock / Mish
Mish Talk

Mike Shedlock

Michael “Mish” Shedlock is a registered investment advisor
representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com/ to
learn more about wealth management for investors seeking strong performance
with low volatility.

Copyright © 2005-2017 Mike Shedlock

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Published at Tue, 25 Apr 2017 16:49:26 +0000

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Q&A: Hedge fund executive Simon Lorne talks Trump, Brexit and ‘Billions’

Q&A: Hedge fund executive Simon Lorne talks Trump, Brexit and ‘Billions’

By Lawrence Delevingne| NEW YORK

Hedge fund critics are becoming increasingly vocal about the $3 trillion industry, arguing that it produces mediocre returns for clients while enriching managers with exorbitant fees.

Some large investors have withdrawn tens of billions of dollars, prompting a string of high-profile firms to restructure or close.

But despite some image problems the industry is actually healthy, according to Simon Lorne, vice chairman and chief legal officer of Millennium Management LLC and chairman since September of global hedge fund lobbying group Alternative Investment Management Association (AIMA).

The following are lightly edited excerpts from Lorne’s comments on Monday in an interview with Reuters at Millennium’s Fifth Avenue headquarters.

 

Reuters: Do hedge funds have a PR problem?

 

Lorne: Yes. Hedge funds are not the favored children of the investment community.

Some number of hedge fund managers are quite successful. If the fund is successful, the compensation structure is such that the individual manager can be quite successful, and so you can get the headline incomes. That makes people resentful in ways they aren’t resentful about star athletes or Bill Gates at Microsoft (MSFT.O) or Facebook (FB.O) or whatever.

 

What would you say to the firefighter who sits on his retirement system’s board and is frustrated with hedge fund performance?

 

Lorne: I’d say look at 10 years, not five years. What hedge funds are about is performing well relative to the risk undertaken. Go back to the meaning of hedge funds – if you are taking risk out of the equation, you should expect to do a little less well on the upside, but do less poorly on the downside.

 

Dan Loeb said a year ago that “we are in the first innings of a washout in hedge funds.” Is that true?

 

Lorne: We haven’t seen the evidence of it yet. We have seen some number of closures, certainly – that happens all the time.

The industry is in fact growing. The numbers bear it out from every possible perspective. We continue to have more funds. We continue to have more of the smart, well informed investors putting money in hedge funds. The institutional investors are increasing their allocation to hedge funds, we see it constantly.

 

Have there been some healthy changes with fee structures?

 

Lorne: I think people are paying more attention to fee structures and to alignment of interests. If you can align incentives better with returns to investors, the industry is better off and the investors are better off.

 

What does President Donald Trump means for hedge funds?

 

Lorne: Except macro funds, we tend not to be riding the big economic waves. We tend to be more arbitraging inefficiencies in the system, taking risk out of the investment process, and I think we do that wherever the administration is.

There’s been a popular view that the Trump administration is going to be pro business and therefore hedge funds will do better, and Jay Clayton as the SEC chairman will be less interested in protecting investors. I think that’s silly. All indications are that Jay Clayton will be a strong chairman who will care about the public interest and who will regulate sensibly. AIMA has always supported sensible regulation for the industry. At a high level, I don’t think the Trump administration particularly means well or ill for the industry.

 

Should parts of Dodd-Frank be tweaked?

 

Lorne: Some of the clearing requirements and the potential limitations on global transactions that lead to potentially inconsistent regulation between the United States and Europe and Asia, in what is in fact a global industry, are potentially troublesome and will impact the global economy and local economies in untoward ways. The regulators can handle that appropriately, but they need to be talking to each other. I worry that as the United States perhaps moves toward measures that would be called protectionist – and who knows what’s going to come out of the French elections, and Brexit and Europe? – but there is some element of balkanization of regulatory structures, where we need to look at more uniform, global structures.

 

What are some Brexit pitfalls for hedge funds?

 

Lorne: A lot of people employed by the industry in London are people who came from other countries and they are worried about whether they are going to be able to stay in London and under what circumstances.

On the larger scale, the ability to trade across borders I think won’t change very much but it’s important to us. I think London will remain one of the two or three major financial capitals of the world, but there are questions around that.

 

What’s your take on hedge funds in popular culture such as the hit TV series “Billions,” the fictionalized tale of a New York hedge-fund billionaire, played by actor Damian Lewis, and the U.S. attorney portrayed by Paul Giamatti who is determined to bring him down?

 

Lorne: I fear people watch “Billions” and think in their minds ‘that’s what hedge funds are all about.’ It’s not. It’s not what we do or would want to do. We don’t behave that way. We don’t go through life that way. Some hedge fund managers do dress quite casually, I will go that far.

 

(Reporting by Lawrence Delevingne, Editing by Carmel Crimmins and Tom Brown)
Published at Wed, 26 Apr 2017 08:40:56 +0000

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Stocks soar after French election first round

Photo

Investors cheer French election results
Investors cheer French election results

  @lamonicabuzz

Vive la France!

Investors around the world cheered the French presidential election results. The hope is that the centrist candidate Emmanuel Macron will have no problem defeating the anti-EU challenger Marine Le Pen in a runoff election on May 7.

Stocks soared in Europe and were set to pop in the United States as well. The Dow rose more than 200 points Monday morning, a gain of about 1%.

Many market observers had worried that Le Pen, much like U.S. President Donald Trump, could wind up defying the odds and win in France.

There were also fears that far-left candidate Jean-Luc Mélenchon could pull off an upset and that the final presidential race would be between him (not Macron) and Le Pen.

“Voting outcomes have developed a habit of surprising people lately,” said Paul Simons, portfolio manager with the BMO Pyrford International Stock Fund. He was referring to both Trump as well as the U.K.’s Brexit vote.

“The good news here is that there aren’t two candidates that are anti the euro and EU,” Simons added.

And even though Le Pen is moving on to the runoff election, she still faces a big uphill climb since she is far behind Macron in the polls in a head-to-head race. Other candidates in France who lost this weekend have also quickly moved to back Macron.

“The French elections gave the markets a sigh of relief,” wrote Chuck Butler, managing director with EverBank Global Markets in a report Monday morning. “A lot of the risks that were associated with the French election have been put on the back burner.”

The S&P 500 and Nasdaq were up 1% as well. The Nasdaq, home to top tech stocks Apple(AAPL, Tech30), Amazon(AMZN, Tech30) and Facebook(FB, Tech30), is at a record high and within spitting distance of topping the 6,000 level for the first time.

Another reason investors are in a good mood? Trump promised late last week that a major announcement about tax reform is coming this Wednesday.

france us stocks up

Worries about the failure of Trump and Republican leaders in Congress to quickly come up with a plan to repeal and replace President Obama’s Affordable Care Act have quickly faded.

The double dose of good news from France and the U.S. could put the broader market back in rally mode, especially if big companies report strong earnings this week.

Caterpillar(CAT), Coca-Cola(KO), McDonald’s(MCD), AT&T(T, Tech30), Ford(F), GM(GM), Microsoft(MSFT, Tech30), Amazon, Google(GOOG) owner Alphabet, Exxon Mobil(XOM) and Starbucks(SBUX) are among the many blue chips that will report their latest results and give outlooks for the rest of 2017 this week.

Investors are clearly less nervous about the global outlook. The VIX,(VIX) a measure of volatility that is often dubbed Wall Street’s fear gauge, plunged 20% Monday morning, a sign that people are growing more bullish.

CNNMoney’s Fear & Greed Index, which looks at the VIX and seven other indicators of market sentiment, finished last week in Fear mode. But the index moved closer to Neutral territory on Monday as investors’ worries about global politics ebb.

Still, investors will continue to nervously watch France until the May 7 election. Monday’s gains could evaporate if Le Pen starts to gain momentum.

Mohamed El-Erian, chief economic adviser with Allianz, said that investors “are looking forward to the likelihood of a Macron win in two weeks, but are yet to overcome the uncertainty that comes with this anti-establishment moment in time.”
Published at Mon, 24 Apr 2017 15:26:32 +0000

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Swamp Creatures Sack D.C.; and Fed Drops MOAB on Wall Street

Swamp Creatures Sack D.C.; and Fed Drops MOAB on Wall Street

  @lamonicabuzz


Wall Street and our central bank are in for a rude awakening very soon! The
idea that the US economy is on stable footing and about to experience a surge
in growth is ridiculous. Hence, the consensus that the Fed can normalize interest
rates and its balance sheet is nothing short of a bad joke…and it’s on them.

For starters, the government’s fiscal deficit for the month of March came
in at $176.2 billion, which means the deficit 6 months into fiscal 2017 is
$526.9 billion and running 15% over last year. If not for the calendar timing
of receipts and payments, our government’s deficit would be a year-to-date
$564.0 billion or 23% above last year. In addition, there was an 18% decline
in corporate income tax collection. We all know there was no corporate tax
reform passed. So the credible conclusion must be reached that corporations
are not growing there profits…they are actually shrinking.

The nation will now bump up against the $20 trillion debt ceiling on April
28th and is facing a possible government shutdown. This will happen to coincide
with day 100 of Trump’s Presidency.

Unfortunately, Trump resembles more like a swamp creature as the days go on.
Sadly, he becoming a flip-flopping carnival barker that duped the American
public into believing he was actually going to cause an earthquake in Washington
that shook the government back down to its constitutional foundation.

He no longer wants a strong dollar and an end to endless interest rate manipulations
that has been robbing the middle class of its purchasing power for decades.
Instead he’s become a Yellen supporting, bubble blowing, XM bank funding, NATO
backing, China loving, card carrying member of the neocons in D.C.

But even though Trump now loves low interest rates, the Fed has probably already
tightened monetary policy enough to send stocks into a bear market and the
already anemic US economy into recession. More proof of recession and deflation
came from the economic data released on Good Friday: CPI down 0.3% in March
and even the core rate fell 0.1%, Retail sales fell 0.2% in March and February
sales were revised sharply lower to minus 0.3%, from previously reported up
0.1%

Housing starts, Empire State Manufacturing and Industrial Production have
all recently disappointed estimates. Housing starts fell a very steep 6.8 percent
to a 1.215 million annualized rate. Empire State Manufacturing dropped from
16.4 in March, to just 5.2 in April and within Industrial Production, the manufacturing
component shrank to minus 0.4 percent.

The sad truth is Trump isn’t draining the swamp…he’s flooding it with more
of the same swamp creature from Goldman Sachs that have mucked up D.C. and
the Fed for decades.

The Fed is About to Drop the MOAB on Wall Street

The mystery here is why the Fed is raising rates when Q1 GDP growth is just
0.5%, there was under 100K net Non-Farm Payroll job growth and a negative reading
on both the headline and core rate of consumer price inflation?

Could it really be that Yellen realizes that savers must finally be rewarded
for putting money in the bank? Perhaps she has come to the conclusion that
asset bubbles must correct down to a level that can be supported by the free
market? If only that were true. What is much more likely is that the clueless
Fed has duped itself into believing it fixed the economy by its massive distortion
of interest rates (100 months of less than 1% Fed Funds Rate), which has forced
stock and home prices to record highs–and debt levels soaring to levels never
before seen.

Wall Street and the Fed (which is a charter member of the swamp club) have
been quick to explain this economic malaise away. The floundering GDP growth
is being explained by a perennially weak first quarter. March NFP growth of
just 98k is excused by the bad weather that occurred during the survey weak.
And negative CPI is being brushed aside by what the Fed hopes are just temporary
factors. But unless the data turns around quickly, the Fed’s days of tightening
monetary policy may have passed.

The economy won’t accelerate unless Trump is able to push through a massive
tax cut very soon. But that doesn’t look likely in the least. Most importantly,
keep in mind, the Fed has been tightening monetary policy since December 2013
when it began tapering QE. Now, after three rate hikes, the economy is teetering
on outright contraction and deflation.

What all this warrants is extreme caution in Bubbleville. With geopolitical
risk flashing bright red, half percent GDP growth, record high equity valuations
and a delusional Fed that continues threatening interest rate normalization;
the market’s reality check is surly imminent.


Michael Pento

Michael Pento, President
Pento Portfolio Strategies

Michael Pento

Michael Pento produces the weekly podcast “The
Mid-week Reality Check”
, is the President and Founder of Pento
Portfolio Strategies
and Author of the book ““The
Coming Bond Market Collapse
.”

PPS is a Registered Investment Advisory Firm that provides money management
services and research for individual and institutional clients.

Michael is a well-established specialist in markets and economics and a regular
guest on CNBC, CNN, Bloomberg, FOX Business News and other international media
outlets. His market analysis can also be read in most major financial publications,
including the Wall Street Journal. He also acts as a Financial Columnist for
Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.

Prior to starting PPS, Michael served as a senior economist and vice president
of the managed products division of Euro Pacific Capital. There, he also led
an external sales division that marketed their managed products to outside
broker-dealers and registered investment advisors.

Additionally, Michael has worked at an investment advisory firm where he helped
create ETFs and UITs that were sold throughout Wall Street. Earlier in his
career he spent two years on the floor of the New York Stock Exchange. He has
carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Michael
Pento graduated from Rowan University in 1991.

Copyright © 2011-2017 Michael Pento

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Published at Mon, 24 Apr 2017 08:06:32 +0000

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Active Traders Are Turning Bullish on Industrial Metals

Active Traders Are Turning Bullish on Industrial Metals

By Casey Murphy | Updated April 24, 2017 — 8:43 AM EDT

When it comes to trading commodities, many products are trading within clearly defined downtrends for a variety of reasons ranging from oversupply to poor weather. One group of commodities that has been able to move counter to the rest is industrial metals. While continued discussion about increased spending on American infrastructure has acted as a strong catalyst to price moves, it seems that nearby support levels could be the next item to propel prices higher. In the article below we’ll take a look at the charts and try to determine the best plan for trading the strength in industrial metals. (For more, see: Can Industrial Metals Make a Comeback?)

iPath Bloomberg Industrial Metals Subindex Total Return ETN

Investors looking to gain exposure to metals such as copper, zinc, and aluminum have traditionally had to rely on the futures market. However, given the rapid rise in popularity of exchange-traded notes, retail investors can now purchase assets such as the iPath Bloomberg Industrial Metals Subindex Total Return ETN (JJM). For those not familiar, this fund is comprised of futures contracts on three of the aforementioned industrial metals as well as nickel. Taking a look at the chart, you can see that the ETN is trading within a strong uptrend and the recent move toward the combined support of the 200-day moving average and dotted trendline could just be what the bulls have been waiting for. This chart is a good example of how the bulls look to time their entry as close to the long-term averages so that they can make the most of the risk/reward. Purchases near the trendline at any time over the past year have shown to be an excellent strategy. (For more, see: Shift Your Attention From Precious Metals to Industrial Metals).

iPath Bloomberg Copper Subindex Total Return

Of the industrial metals, the one that looks poised for the strongest rally is copper. Taking a look at the chart of the iPath Bloomberg Copper Subindex Total Return ETN (JJC), you can see that the price has been trading within a period of consolidation since its strong run higher after the results from the U.S. Presidential election in November. The approaching support of the 200-day moving average could be just what is needed to entice the bulls to look for their entry points. The nearby support levels combined with the recent pullback has created some of the best risk/reward readings so far in 2017. Based on the charts, we’d expect traders to place buy orders as close to the trendline as possible and then protect them by placing stop-loss orders below $27.72. (For more, see: Investing In The Metals Markets).

iPath Bloomberg Aluminum Subindex Total Return ETN

One of the most overlooked commodities can be aluminum, but the chart of the iPath Bloomberg Aluminum Subindex Total Return ETN (JJU) is suggesting that it is worth paying attention to. This chart is a clear example of the shifting trend that is taking place in the industrial metals complex. Active traders may choose to remain patient and look for an entry closer to the 200-day moving average like the case that is playing out in copper. (For more, check out: 3 Commodity Charts to Watch in 2017).

The Bottom Line

In recent days industrial metals such as aluminum, copper, and zinc along with the associated miners have renewed the interest of many active traders. More specifically, the pronounced shift in the trend combined with nearby support is creating some of the best risk/reward setups anywhere in commodities. (For more, see: These Commodities Are Trading Near Major Levels of Support).

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.
Published at Mon, 24 Apr 2017 12:43:00 +0000

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Wall St rallies on earnings; Nasdaq hits record

by bones64 from Pixabay

 

Wall St rallies on earnings; Nasdaq hits record

By Chuck Mikolajczak| NEW YORK

U.S. stocks rallied on Thursday, with the Nasdaq closing at a record, as a round of solid earnings led by American Express pushed equities higher.

The credit card company (AXP.N) closed up 5.9 percent as the top boost to the Dow Industrials after reporting a smaller-than-expected drop in quarterly profit late Wednesday.

CSX Corp (CSX.O), up 5.6 percent, was one of the best performers on the S&P 500 after the railroad reported a better-than-expected quarterly net profit driven by rising freight volumes and said it plans to cut costs and boost profitability moving forward.

“You need a catalyst to go higher and the only one that is out there to me that is logical and would drive the market higher is earnings, and so far it is OK,” said Phil Blancato, CEO of Ladenberg Thalmann Asset Management in New York.

“You look at a day like today and it tells you there is a lot of cash on the sidelines that wants an opportunity to buy when the market sells off even just a little bit.”

Major indexes have fallen for two straight weeks, retreating from record levels as worries about President Donald Trump’s ability to deliver on his pro-growth promises raised some concern about stretched stock valuations.

Mounting tensions between North Korea and the United States, as well as the looming French presidential elections, also served to heighten investor caution. Recent polls showed centrist Emmanuel Macron hung on to his lead in a four-way French race that is too close to call.

Of the 82 companies in the S&P 500 that have reported earnings through Thursday afternoon, about 75 percent have topped expectations, according to Thomson Reuters data, above the 71 percent average for the past four quarters.

Overall, profits of S&P 500 companies are estimated to have risen 11.1 percent in the quarter, the best since 2011.

The Dow Jones Industrial Average .DJI rose 174.22 points, or 0.85 percent, to 20,578.71, the S&P 500 .SPX gained 17.67 points, or 0.76 percent, to 2,355.84 and the Nasdaq Composite .IXIC added 53.74 points, or 0.92 percent, to 5,916.78.

The S&P 500 closed just below its 50-day moving average, a level that had acted as resistance after the index fell below it last week.

Philip Morris (PM.N) fell 3.5 percent to $109.98 as the biggest drag to the benchmark S&P index after the tobacco maker’s first-quarter profit forecast fell below estimates.

Advancing issues outnumbered declining ones on the NYSE by a 2.49-to-1 ratio; on Nasdaq, a 2.61-to-1 ratio favored advancers.

The S&P 500 posted 40 new 52-week highs and 1 new low; the Nasdaq Composite recorded 117 new highs and 35 new lows.

About 6.65 billion shares changed hands in U.S. exchanges, compared with the 6.3 billion daily average over the last 20 sessions.

 

 

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)
Published at Thu, 20 Apr 2017 21:50:27 +0000

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Fed’s Beige Book: Modest to Moderate expansion, Tight labor markets

 

Fed’s Beige Book: Modest to Moderate expansion, Tight labor markets

by Bill McBride on 4/19/2017 02:07:00 PM

Fed’s Beige Book “This report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before April 10, 2017.”

Economic activity increased in each of the twelve Federal Reserve Districts between mid-February and the end of March, with the pace of expansion equally split between modest and moderate. In addition, the pickup was evident to varying degrees across economic sectors. Manufacturing continued to expand at a modest to moderate pace, although growth in freight shipments slowed slightly. Consumer spending varied as reports of stronger light vehicle sales were accompanied by somewhat softer readings in non-auto retail spending. Tourism and travel activity generally picked up. On balance, reports suggested that residential construction growth accelerated somewhat even as growth in home sales slowed, in part due to a lack of inventory. Nonresidential construction remained strong, but became more mixed in some regions; leasing activity generally improved at a more modest pace. More than half of the reports suggested that loan volumes increased, while only one said they were down modestly. Non-financial services generally continued to expand steadily. Energy-related businesses noted improved conditions while agricultural conditions varied.

Employment expanded across the nation and increases ranged from modest to moderate during this period. Labor markets remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers. Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply. A larger number of firms mentioned higher turnover rates and more difficulty retaining workers. A couple of Districts reported that worker shortages and increased labor costs were restraining growth in some sectors, including manufacturing, transportation, and construction. Businesses generally expected labor demand to increase moderately in the next six months, and looked for modest wage growth.
emphasis added

And a few excerpts on real estate:

Boston: Residential real estate markets in the First District continued to struggle with a shortage of inventory. All six First District states as well as the Greater Boston area reported large declines in inventory for both single-family homes and condos from February 2016 to February 2017. … New York: Housing markets across the District have been mixed but, on balance a bit stronger since the last report, with ongoing slack at the high end of the market. New York City’s rental market has been steady to somewhat weaker. Landlord concessions have grown more prevalent in an effort to keep rents and vacancy rates steady. Effective rents (factoring in these concessions) have continued to decline–particularly on larger units and particularly in Manhattan. Elsewhere, rents continued to rise in northern New Jersey but were mostly flat across upstate New York. … San Franciso: Conditions in real estate markets remained stable, and activity remained strong in most of the District. Demand for residential real estate remained robust in most parts of the District. Overall, contacts reported that construction activity was slowed only by a lack of available land, labor, and materials. Sales of new and existing homes were robust, and inventories remained low, with one contact in Seattle reporting that new property listings remained on the market for only a couple of days.

Mostly inventories are low, and rents are soft.

Published at Wed, 19 Apr 2017 18:07:00 +0000

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Goldman Sachs, J&J pull Wall Street lower

Photo

 Goldman Sachs, J&J pull Wall Street lower

By Chuck Mikolajczak| NEW YORK

The S&P 500 fell for the fourth time in five sessions on Tuesday, weighed down by a drop in Goldman Sachs and Johnson & Johnson following their quarterly results, while geopolitical tensions added to investor caution.

Goldman Sachs lost 4.7 percent to $215.59, after hitting its lowest intraday level since Nov. 29. The bank posted earnings that missed expectations as trading revenue dropped.

Goldman shares suffered their biggest daily percentage drop since June 24, a day after Britain voted to leave the European Union.

Johnson & Johnson (JNJ.N) slumped 3.1 percent for its worst day in 14 months after quarterly revenue fell short of analysts’ expectations.

“The Goldman numbers today were disappointing to the market, in what hasn’t been a bad group of numbers for most of the banks,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

“There was some optimism for greater top-line growth and we have seen in the early numbers that have come out that companies have certainly learned how to cost cut and manage the bottom line but they really are having trouble growing the top line.”

Healthcare .SPXHC, down 1 percent, and financials, off 0.8 percent, were the two worst-performing of the 11 major S&P sectors.

Cardinal Health (CAH.N), down 11.5 percent, also weighed on healthcare after a disappointing profit forecast overshadowed a deal to buy medical supplies businesses from Medtronic (MDT.N) for $6.1 billion.

Although Bank of America (BAC.N) reported a better-than-expected profit, its shares reversed course to close slightly lower, falling in line with the broader market.

A rough start to the earnings season could add to investor concerns about market valuations after a strong post-election rally largely based on expectations of pro-growth policies from President Donald Trump’s administration drove major indexes to record highs.

The Dow Jones Industrial Average .DJI fell 113.64 points, or 0.55 percent, to 20,523.28, the S&P 500 .SPX lost 6.83 points, or 0.29 percent, to 2,342.18 and the Nasdaq Composite .IXIC dropped 7.32 points, or 0.12 percent, to 5,849.47.

Safe-havens continued to be in favor, with gold and U.S. Treasury prices climbing ahead of crucial presidential elections in France, rising tensions between the United States and North Korea and the calling of early elections in Britain.

Despite the high-profile earnings misses, first-quarter results have been promising overall. According to Thomson Reuters data through Tuesday morning, of the 45 companies in the S&P 500 that have reported results, 76 percent have topped expectations.

Declining issues outnumbered advancing ones on the NYSE by a 1.11-to-1 ratio; on Nasdaq, a 1.27-to-1 ratio favored decliners.

The S&P 500 posted 17 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 40 new highs and 59 new lows.

About 6.07 billion shares changed hands in U.S. exchanges, compared with the 6.41 billion daily average over the last 20 sessions.

(Reporting by Chuck Mikolajczak; Editing by Cynthia Osterman and Nick Zieminski)
Published at Tue, 18 Apr 2017 20:21:55 +0000

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Premarket: 6 things to know before the bell

 

premarket Monday
Click chart for more in-depth data.

1. China GDP: The Chinese economy picked up steam in the first quarter, with GDP up 6.9% from a year earlier.

That’s the fastest pace of growth since the third quarter of 2015 and slightly above what some economists had been predicting.

China’s ruling Communist Party has been prioritizing economic stability ahead of a key leadership reshuffle later this year when President Xi Jinping’s second term in power will start. But the International Monetary Fund and other agencies have urged the Chinese government to focus on tackling the country’s high levels of corporate debt.

The Shanghai Composite lost 0.7% on Monday, while the tech-heavy Shenzhen Composite shed 1.4%.

2. North Korea tensions: U.S. Vice President Mike Pence has issued a warning to North Korea after a failed attempted missile launch by the country on Sunday.

Pence, who was in South Korea, said that Pyongyang should not test the resolve of the U.S. “or the strength of our military forces.”

Increased tensions in the region, along with the deterioration in relationship between the U.S. and Russia and attacks in Syria, have forced investors to look for safe havens assets.

Gold, the Japanese yen and the Swiss franc all gained in early trading on Monday.

3. Moneygram bid: Chinese firm Ant Financial on Monday upped its offer to $1.2 billion for MoneyGram(MGI), one of the most popular avenues for sending money from the U.S. to Mexico and other countries.

The original deal struck in January was for $880 million, but U.S. rival Euronet Worldwide(EEFT) jumped in last month with an unsolicited $1 billion offer.

4. Global market overview:U.S. stock futures are edging lower.

Most European markets are closed for a holiday. Asian markets ended mixed.

Turkey’s main stock market advanced 1% after a referendum to expand the powers of President Recep Tayyip Erdogan saw the “yes” side winning by the slimmest of margins.

The Turkish lira also strengthened in response.

U.S. crude oil futures were down 0.9% to trade at $52.70 per barrel.

5. Earnings and economics:United Continental Holdings(UAL), the owner of United Airlines, will release its quarterly report after the closing bell on Monday, a week after becoming embroiled in a turbulent PR nightmare.

The company will hold a conference call with investors on Tuesday.

Netflix(NFLX, Tech30) will also report after the markets close on Monday. Sales for last quarter are expected to clock in at $2.6 billion, up from $2 billion this time last year.

6. Coming this week:

Monday – China GDP; United Airlines(UAL), Netflix(NFLX, Tech30) earnings
Tuesday – U.S. Tax Day; United Airlines(UAL) analyst call, Goldman Sachs(GS), Bank of America(BAC) and IBM(IBM, Tech30) report earnings
Wednesday – U.S. Crude oil inventories report, Morgan Stanley(MS), BlackRock(BLK), eBay(EBAY), American Express(AXP) publish results
Thursday – Mattel(MAT) earnings report
Friday – U.S. release of Samsung’s(SSNLF) Galaxy S8
Published at Mon, 17 Apr 2017 08:51:49 +0000

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Key Measures Show Inflation close to 2% in March

Key Measures Show Inflation close to 2% in March

by Bill McBride on 4/14/2017 12:09:00 PM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (1.8% annualized rate) in March. The 16% trimmed-mean Consumer Price Index was unchanged (0.3% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.3% (-3.4% annualized rate) in March. The CPI less food and energy fell 0.1% (-1.5% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for March here. Motor fuel was down 53% annualized in March.

Inflation MeasuresClick on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 2.1%, and the CPI less food and energy rose 2.0%. Core PCE is for February and increased 1.75% year-over-year.

On a monthly basis, median CPI was at 1.8% annualized, trimmed-mean CPI was at 0.3% annualized, and core CPI was at -1.5% annualized.

Using these measures, inflation was soft in March – but has generally been moving up, and most of these measures are at or above the Fed’s 2% target (Core PCE is still below).

Published at Fri, 14 Apr 2017 16:09:00 +0000

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U.S. labor market tightening, inflation trending higher

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 U.S. labor market tightening, inflation trending higher

By Lucia Mutikani| WASHINGTON

The number of Americans filing for unemployment aid unexpectedly fell last week and consumer sentiment rose early this month amid continued optimism over household finances, suggesting a sharp slowdown in job growth in March was an aberration.

While other data on Thursday showed producer prices falling in March for the first time in seven months, prices recorded their biggest year-on-year increase in five years. The reports pointed to a steadily firming economy and could encourage the Federal Reserve to increase interest rates again in June.

“Today’s reports are generally consistent with the Fed’s narrative that the economy is close to full employment and some inflationary pressures are building,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Initial claims for state unemployment benefits slipped 1,000to a seasonally adjusted 234,000 for the week ended April 8, the Labor Department said. That was the third straight weekly decline in claims and left them near a 44-year low of 227,000 hit in February.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 110 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is close to full employment, with the unemployment rate at a near 10-year low of 4.5 percent. Economists had forecast first-time applications for jobless benefits rising to 245,000 last week.

The low level of claims suggests that a sharp slowdown in job growth in March was a blip and the labor market is tightening. Nonfarm payrolls increased by 98,000 jobs last month, the fewest since last May.

“Temporarily higher mid-March readings probably in large part reflected weather drags that were apparent in the March employment report, and much stronger results in the first half of April are pointing to a reacceleration in payrolls in April,” said Ted Wieseman, an economist at Morgan Stanley in New York.

A separate survey from the University of Michigan showed its consumer sentiment index rising to a reading of 98.0 early this month from 96.9 in March.

The survey’s current economic conditions index jumped to its highest level since 2000, with an increase in the share of households reporting an improvement in their finances.

 

SPENDING MAY ACCELERATE

Strong consumer sentiment could suggest an acceleration in consumer spending in the second quarter after an apparent slowdown at the start of the year. A surge in confidence in late 2016 and early this year failed to translate into stronger spending.

The dollar fell against a basket of currencies as investors assessed comments by President Donald Trump to the Wall Street Journal late on Wednesday that the dollar was “getting too strong” and that he liked a “low-interest rate policy.”

U.S. Treasury yields briefly fell to a five-month low, while stocks on Wall Street were little changed. The Fed raised its benchmark overnight interest rate by a quarter of a percentage point last month and has said it expected to increase borrowing costs at least twice more this year.

In another report on Thursday, the Labor Department said its producer price index for final demand slipped 0.1 percent last month, the first decline since August. The PPI gained 0.3 percent in February.

Despite last month’s dip in prices, the PPI shot up 2.3 percent in the 12 months through March. That was the biggest increase since March 2012 and followed a 2.2 percent jump in February.

A 0.1 percent dip in prices for final demand services accounted for three quarters of the drop in the PPI in March. Energy prices fell 2.9 percent, the first decline since August, with the cost of gasoline tumbling 8.3 percent.

With oil prices rising in recent days and recovering nearly all of March’s losses, monthly producer prices are likely to resume their upward trend.

The dollar’s 2.8 percent drop this year against the currencies of the United States’ main trading partners is also keeping the underlying trend in producer prices elevated.

Final demand goods less food and energy increased 0.4 percent last month after edging up 0.1 percent in February.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci.

 

Published at Thu, 13 Apr 2017 16:21:09 +0000

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U.S. dollar drops sharply after Trump calls it ‘too strong’

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Trump slams China as currency manipulator

Trump slams China as currency manipulator

  @byHeatherLong

President Trump caused the U.S. dollar to slump Wednesday.

The dollar dropped 0.7%, a major move, after Trump told the Wall Street Journal that the dollar is “getting too strong.”

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,” Trump said. “But that’s hurting — that will hurt ultimately.”

The dollar hit its highest level in 13 years shortly after Trump won the election. It was widely viewed as a sign that investors believe America will grow faster than other parts of the world.

But now the dollar might be getting too mighty. The president is worried that US businesses, especially manufacturers, won’t be able to compete. American goods are more expensive relative to European or Japanese products when the dollar’s value is too high.

“It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency,” Trump said.

trump dollar falls

 

On the campaign trail, Trump frequently slammed China for purposefully weakening its currency, the yuan, to make its goods cheaper on the world market.

He vowed to label China a “currency manipulator” on Day One of his presidency, the equivalent of saying that China cheats. That didn’t happen, but the president continued to talk tough on China. In early April, he called China the “world champions” of currency devaluation.

But now, Trump is saying something very different.

“They’re not currency manipulators,” he said Wednesday.

The U-turn in the president’s stance comes mere days after Trump and China’s President Xi’s first big meeting. The two countries are trying to work together to keep North Korea from launching missiles.

Trump also acknowledged that China is no longer manipulating its currency, at least not in a harmful way to the US. China has actually been attempting to prop up the yuan lately so wealthy Chinese investors keep their money at home instead of investing overseas.

In addition to softening his tone on the dollar, Trump also sounded a lot more upbeat about Federal Reserve Chair Janet Yellen.

“I like her, I respect her,” Trump told the Wall Street Journal.

Only a few months ago, Trump said Yellen should “be ashamed of herself” for keeping interest rates low. He said she was just doing that to help President Obama.

Now the president said he “likes” low interest rates and that he might even ask Yellen to stay on when her term expires in early 2018.
Published at Wed, 12 Apr 2017 20:10:14 +0000

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Wall Street slips as geopolitical risks gather, earnings loom

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 Wall Street slips as geopolitical risks gather, earnings loom

By Yashaswini Swamynathan

U.S. stocks edged lower on Wednesday as investors assessed uncertainty stemming from rising geopolitical tensions and the upcoming corporate earnings season.

The United States launched missiles at a Syrian airfield last week to retaliate a deadly chemical attack on civilians. The strikes pushed President Donald Trump, who came to power in January calling for warmer ties with Syria’s ally Russia, and his administration into confrontation with Moscow.

Also, Chinese President Xi Jinping called on the U.S. for a peaceful resolution with North Korea, which has warned it would launch a nuclear attack if provoked by the United States, as a U.S. Navy strike group headed toward the western Pacific.

The S&P 500 fell below its 50-day moving average, while the price of gold and VIX .VIX, Wall Street’s fear gauge, rose to their highest levels since November.

At 10:57 a.m. ET, the Dow Jones Industrial Average .DJI was down 52.9 points, or 0.26 percent, at 20,598.4, the S&P 500 .SPX was down 7.27 points, or 0.31 percent, at 2,346.51 and the Nasdaq Composite .IXIC was down 19.45 points, or 0.33 percent, at 5,847.32.

Earnings are likely to be the next catalyst for the market.

The big banks, which have outperformed in a post-election rally since November, are of particular interest as investors fret over valuations amid a lack of clarity on Trump’s ability to deliver on his pro-growth policies of tax and regulatory cuts.

Financials were the worst hit on Wednesday. The S&P 500 financial index .SPSY tumbled 0.91 percent, setting it up to post the fourth straight day of decline.

“Technically, we are due for a breather and if the earnings season disappoints, it could provide the correction that we need,” said Josh Jalinski, president of Jalinski Advisory Group.

JPMorgan (JPM.N), Citigroup (C.N) and Wells Fargo (WFC.N) are scheduled to report results on Thursday, which will be the last trading day of the week on Wall Street ahead of the Good Friday holiday. Seven of the 11 major S&P sectors were lower.

Utilities .SPLRCU, real estate .SPLRCR and consumer staples .SPLRCS, defensive sectors with slow but predictable growth, rose. Chipmaker Qualcomm (QCOM.O) dropped 2.8 percent to $53.81 after it was asked to refund Canada’s BlackBerry (BBRY.O) $814.9 million in an arbitration settlement.

Delta Air Lines (DAL.N) was up 3.5 percent at $46.90, boosted by a quarterly profit beat.

Declining issues outnumbered advancers on the NYSE by 1,869 to 846. On the Nasdaq, 1,832 issues fell and 776 advanced.

The S&P 500 index showed nine 52-week highs and no new lows, while the Nasdaq recorded 40 highs and 24 lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila)
Published at Wed, 12 Apr 2017 15:34:05 +0000

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Economy Contracting but Expect Higher Stock Prices

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tags
By Unsplash from Pixabay

Economy Contracting but Expect Higher Stock Prices

By: Chris Vermeulen | Wed, Apr 12, 2017


The United States is the world’s largest and most diversified economy! It
is currently suffering through a protracted period of slow growth
which has held down job creation and labor market participation. The Pew Research
Center reported, in late 2015, that a mere 19% of Americans trust the government
either always or most of the time.

The FED
must print more money
in order to keep the party going forward.

The bottom line is that this current bull market has been driven mostly by
corporations which are buying back their shares, over the years. Individual
investors have increasingly been moving out of equity mutual funds and into
equity ETF’s.

Equity ETF Inflows 2003-2017

The Congressional Budget Office (CBO) reported that in fiscal year 2016, the
federal budget deficit increased in relation to the GDP, for the first time
since 2009. The CBO projects that over the next decade, budget deficits will
follow an upward trajectory. The spending costs for retirement and health care
programs targeted towards senior citizens, and rising interest payments on
the government’s debt will be the root drivers. There will be only a modest
growth in revenue collections. This will drive up public debt to its’ highest
level of gross domestic product (GDP) since shortly after World War II ended.

The Congressional Budget Office stated that the nation’s
public debt will reach 145 percent of gross domestic product by 2047

Federal Debt Held by the Public 1790-2030

Conclusion:

The BULLISH Trend in the stock markets is not reversing in the near
future.

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Chris Vermeulen
President of AlgoTrades Systems
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Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized
market technical analyst and trader. Involved in the markets since 1997.

Chris’ mission is to help his clients boost their investment performance while
reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and
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Through years of research, trading and helping thousands of individual investors
around the world. He designed an automated algorithmic trading system for the
S&P 500 index which solves his client’s biggest problem related to investing
in the stock market: the ability to profit in both a rising and falling market.

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He is the author of the popular book “Technical
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children.

Copyright © 2008-2017 Chris Vermeulen

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com
Published at Wed, 12 Apr 2017 09:21:41 +0000

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Update: Predicting the Next Recession

by geralt from Pixabay

Update: Predicting the Next Recession

by Bill McBride on 4/11/2017 03:45:00 PM

CR April 2017 Update: In 2013, I wrote a post “Predicting the Next Recession“. I repeated the post in January 2015 (and in the summer of 2015, early last year and in August 2016) because of all the recession calls. In late 2015, the recession callers were out in force – arguing the problems in China, combined with the impact on oil producers of lower oil prices (and defaults by energy companies) – would lead to a global recession and drag the US into recession.  I didn’t think so – and I was correct.

I’ve added a few updates in italics by year.  Most of the text is from January 2013.

A few thoughts on the “next recession” … Forecasters generally have a terrible record at predicting recessions. There are many reasons for this poor performance. In 1987, economist Victor Zarnowitz wrote in “The Record and Improvability of Economic Forecasting” that there was too much reliance on trends, and he also noted that predictive failure was also due to forecasters’ incentives. Zarnowitz wrote: “predicting a general downturn is always unpopular and predicting it prematurely—ahead of others—may prove quite costly to the forecaster and his customers”.

Incentives motivate Wall Street economic forecasters to always be optimistic about the future (just like stock analysts). Of course, for the media and bloggers, there is an incentive to always be bearish, because bad news drives traffic (hence the prevalence of yellow journalism).

In addition to paying attention to incentives, we also have to be careful not to rely “heavily on the persistence of trends”. One of the reasons I focus on residential investment (especially housing starts and new home sales) is residential investment is very cyclical and is frequently the best leading indicator for the economy. UCLA’s Ed Leamer went so far as to argue that: “Housing IS the Business Cycle“. Usually residential investment leads the economy both into and out of recessions. The most recent recovery was an exception, but it was fairly easy to predict a sluggish recovery without a contribution from housing.

Since I started this blog in January 2005, I’ve been pretty lucky on calling the business cycle.  I argued no recession in 2005 and 2006, then at the beginning of 2007 I predicted a recession would start that year (made it by one month with the Great Recession starting in December 2007).  And in 2009, I argued the economy had bottomed and we’d see sluggish growth.

Finally, over the last 18 months, a number of forecasters (mostly online) have argued a recession was imminent.  I responded that I wasn’t even on “recession watch”, primarily because I thought residential investment was bottoming.

[CR 2015 Update: this was written two years ago – I’m not sure if those calling for a recession then have acknowledged their incorrect forecasts and / or changed theirs views (like ECRI and various bloggers). Clearly they were wrong.] [CR April 2017 Update: Now it has been over four years!  And yes, ECRI has admitted their recession calls were incorrect.  Not sure about the rest of the recession callers.]

Now one of my blogging goals is to see if I can get lucky again and call the next recession correctly.  Right now I’m pretty optimistic (see: The Future’s so Bright …) and I expect a pickup in growth over the next few years (2013 will be sluggish with all the austerity).

The next recession will probably be caused by one of the following (from least likely to most likely):

3) An exogenous event such as a pandemic, significant military conflict, disruption of energy supplies for any reason, a major natural disaster (meteor strike, super volcano, etc), and a number of other low probability reasons. All of these events are possible, but they are unpredictable, and the probabilities are low that they will happen in the next few years or even decades.

[CR 2016 Update: The recent recession calls are mostly based on exogenous events: the problems in China and in commodity based economies (especially oil based).  There will be some spillover to the US such as fewer exports (and an impact on oil producing regions in the US), but unless there is a related financial crisis, I think the spillover will be insufficient to cause a recession in the US.]

2) Significant policy error. This might involve premature or too rapid fiscal or monetary tightening (like the US in 1937 or eurozone in 2012).  Two examples: not reaching a fiscal agreement and going off the “fiscal cliff” probably would have led to a recession, and Congress refusing to “pay the bills” would have been a policy error that would have taken the economy into recession.  Both are off the table now, but there remains some risk of future policy errors.

Note: Usually the optimal path for reducing the deficit means avoiding a recession since a recession pushes up the deficit as revenues decline and automatic spending (unemployment insurance, etc) increases.  So usually one of the goals for fiscal policymakers is to avoid taking the economy into recession. Too much austerity too quickly is self defeating.

[CR 2017 Update: Austerity was a mistake (obvious at the time).  And it is possible that we will see serious policy mistakes from the new administration (a complete wildcard).  And it is possible the Fed could tighten too quickly. ]

1) Most of the post-WWII recessions were caused by the Fed tightening monetary policy to slow inflation. I think this is the most likely cause of the next recession. Usually, when inflation starts to become a concern, the Fed tries to engineer a “soft landing”, and frequently the result is a recession. Since inflation is not an immediate concern, the Fed will probably stay accommodative for a few more years.

So right now I expect further growth for the next few years (all the austerity in 2013 concerns me, especially over the next couple of quarters as people adjust to higher payroll taxes, but I think we will avoid contraction). [CR 2015 Update: We avoided contraction in 2013!] I think the most likely cause of the next recession will be Fed tightening to combat inflation sometime in the future – and residential investment (housing starts, new home sales) will probably turn down well in advance of the recession. In other words, I expect the next recession to be a more normal economic downturn – and I don’t expect a recession for a few years.

[CR April 2017 Update: This was written in 2013 – and my prediction for no “recession for a few years” was correct.  This still seems correct today, so no recession in the immediate future (not in 2017). ]

Published at Tue, 11 Apr 2017 19:45:00 +0000

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