There were no fireworks at Fed Chairman Bernanke’s first post-FOMC press briefing. For the financial markets, it was a straight-forward and relatively dull outing. It reinforced prior notions, but we did learn a few things.
Later this month, Fed Chairman Bernanke will hold his first post-FOMC meeting press conference. Officially, the press conference is meant “to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions.” However, the real goal is to reclaim the narrative. The Fed was caught off guard by the amount of criticism and second-guessing it received in 2010. Fed Chairman Bernanke tried hard to counter that, appearing on 60 Minutes, speaking to trade groups, and so on. These press conferences should help clear things up regarding monetary policy – not that we’ll receive clear signals of future Fed policy moves – rather, we’ll get important information on how the Fed will decide what to do.
The Fed Outlook: Uncertainty and ReluctanceJeff Green
The Federal Open Market Committee policy statement and Chairman Bernanke’s post-meeting press conference held few surprises. Monetary policy is still accommodative – and still on hold. There’s also apparently little will at the Fed to do more to help the recovery along. Fortunately for the Fed and the consumer, we can catch a break if oil prices continue to decline.
Senior Fed officials meet next week amid what is widely seen as a slow patch in economic growth. A key question for investors, as well as for monetary policymakers, is whether this slowing will be temporary. Most likely, growth should pick up in the second half of the year. However, there are downside risks in the near term. Moreover, monetary policy appears to be handcuffed and fiscal policy is set to go in the wrong direction.
Inflation Expectations, Budget DecisionsJeff Green
On the surface, the February Employment Report was strong, but the details suggest more moderate improvement in the labor market. Still, new hiring is likely to pick up in the spring. Higher oil prices threaten the outlook for jobs and the overall economy. The Fed appears to be in a tough spot, but should keep monetary policy accommodative for some time.
Commodity prices have moved sharply higher over the last several months, leading to increased worries that the Fed is “behind the curve,” “debasing the currency,” or “monetizing the debt.” Such fears are based on a poor understanding of the inflation process and how the Fed conducts monetary policy.
Commodity prices have moved sharply higher over the last several months, leading to increased worries that the Fed is “behind the curve,” “debasing the currency,” or “monetizing the debt.” Such fears are based on a poor understanding of the inflation process and how the Fed conducts monetary policy.
Japan’s earthquake/tsunami/nuclear tragedy and heightened tensions in the Middle East and North Africa have led to some concerns about the global economy, and in turn, the strength of the U.S. recovery. A weaker Japanese economy and supply-chain disruptions are detrimental to U.S. growth, but moderately and only short-term in nature. Developments in the Middle East and North Africa are more uncertain, but are likely to keep oil prices relatively elevated. None of this is expected to jeopardize the U.S. recovery, but it could keep growth from being as strong as was hoped for just a month ago.
On the surface, the February Employment Report was strong, but the details suggest more moderate improvement in the labor market. Still, new hiring is likely to pick up in the spring. Higher oil prices threaten the outlook for jobs and the overall economy. The Fed appears to be in a tough spot, but should keep monetary policy accommodative for some time.
Later this month, Fed Chairman Bernanke will hold his first post-FOMC meeting press conference. Officially, the press conference is meant “to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions.” However, the real goal is to reclaim the narrative. The Fed was caught off guard by the amount of criticism and second-guessing it received in 2010. Fed Chairman Bernanke tried hard to counter that, appearing on 60 Minutes, speaking to trade groups, and so on. These press conferences should help clear things up regarding monetary policy – not that we’ll receive clear signals of future Fed policy moves – rather, we’ll get important information on how the Fed will decide what to do.
The Fed Outlook: Uncertainty and ReluctanceJeff Green
The Federal Open Market Committee policy statement and Chairman Bernanke’s post-meeting press conference held few surprises. Monetary policy is still accommodative – and still on hold. There’s also apparently little will at the Fed to do more to help the recovery along. Fortunately for the Fed and the consumer, we can catch a break if oil prices continue to decline.
Senior Fed officials meet next week amid what is widely seen as a slow patch in economic growth. A key question for investors, as well as for monetary policymakers, is whether this slowing will be temporary. Most likely, growth should pick up in the second half of the year. However, there are downside risks in the near term. Moreover, monetary policy appears to be handcuffed and fiscal policy is set to go in the wrong direction.
Inflation Expectations, Budget DecisionsJeff Green
On the surface, the February Employment Report was strong, but the details suggest more moderate improvement in the labor market. Still, new hiring is likely to pick up in the spring. Higher oil prices threaten the outlook for jobs and the overall economy. The Fed appears to be in a tough spot, but should keep monetary policy accommodative for some time.
Commodity prices have moved sharply higher over the last several months, leading to increased worries that the Fed is “behind the curve,” “debasing the currency,” or “monetizing the debt.” Such fears are based on a poor understanding of the inflation process and how the Fed conducts monetary policy.
Commodity prices have moved sharply higher over the last several months, leading to increased worries that the Fed is “behind the curve,” “debasing the currency,” or “monetizing the debt.” Such fears are based on a poor understanding of the inflation process and how the Fed conducts monetary policy.
Japan’s earthquake/tsunami/nuclear tragedy and heightened tensions in the Middle East and North Africa have led to some concerns about the global economy, and in turn, the strength of the U.S. recovery. A weaker Japanese economy and supply-chain disruptions are detrimental to U.S. growth, but moderately and only short-term in nature. Developments in the Middle East and North Africa are more uncertain, but are likely to keep oil prices relatively elevated. None of this is expected to jeopardize the U.S. recovery, but it could keep growth from being as strong as was hoped for just a month ago.
On the surface, the February Employment Report was strong, but the details suggest more moderate improvement in the labor market. Still, new hiring is likely to pick up in the spring. Higher oil prices threaten the outlook for jobs and the overall economy. The Fed appears to be in a tough spot, but should keep monetary policy accommodative for some time.
The recent data have been mixed, consistent with a slower rate of economic growth in the near term. The economy faced a number of headwinds in the first half of the year. Some of those headwinds are likely to be temporary. Others will linger. Growth should pick up in the second half of the year, but the pace seems unlikely to be especially strong
In the last few months, some have taken to calling the current economic period, “the Lesser Depression” (instead of “the Great Recession”). There’s no precise definition of “a depression” (and as it is, the definition of “a recession” is rather vague). Most economists would say a depression is a lengthy period of elevated unemployment. That’s exactly what we may be staring out now. Monetary and fiscal policy could provide further support for growth, but there’s a lot of resistance.
Shares Rebound On U.S. Budget Talk, Yen FallsNeil Hendry
World equity markets and oil prices rebounded after U.S. House Republicans announced plans to seek a short-term deal to raise the debt ceiling. Consumer sentiment in the U.S. fell to its lowest level in over a year, adding pressure on stocks. The yen fell ahead of potential new asset purchase measures by the Bank of Japan aimed at achieving a 2% inflation target.
Last week saw broad weakness in US equities and higher yields for global sovereign bonds. The dollar strengthened due to increased expectations of a December Fed rate hike, pressuring gold and bonds which had seen speculative long positions. Economic data was mixed with a stronger auto sales figure but weaker employment growth. Outside the US, emerging market stocks and bonds outperformed despite dollar strength. Going forward, analysts expect the sixth straight quarter of declining corporate profits in the US.
The advance estimate of fourth quarter GDP growth was close to expectations, however two major components, net exports and inventory changes, were larger than anticipated and had opposing impacts. Slower inventory growth subtracted from GDP growth while an improvement in the trade deficit added to GDP growth. The inventory correction in the fourth quarter may have been excessive and production is expected to increase in early 2011 as inventories are lean. Stronger consumer spending in the fourth quarter was fueled by a drop in the savings rate, and disposable income will be boosted in the first quarter of 2011 by a reduction in payroll taxes. Overall GDP growth in the first half of 2011 is now estimated to be higher than previously expected.
Dear All,
The credit rally is cooling off, equity markets are continuing to rise and geopolitical tensions remain.
We still believe 2018 will be a year of synchronised growth, accomodative monetary policies (ECB, PBOC, BoJ) where earnings growth will support equity valuations.
Please find our CIO's Investment Outlook for financial markets in 2018.
We wish you a prosperous new year.
Kindest Regards
Growth in household credit balances increased in 2017 after slowing in 2016. Secured credit grew 4.1% in 2017 compared to 2.3% in 2016, driven by higher mortgage and vehicle finance growth. Unsecured credit also grew faster in 2017 at 3.1% after contracting in 2016, as personal loans and credit card balances increased. Mortgage balances grew 3.5% in 2017, with the housing market seeing modest growth. Forecasts indicate household credit may grow around 3.5% in 2018.
Epic Research is a leading financial advisory firm. We offer various financial services and a daily report on different segments of market. So that the traders and investors can get the overview of market's performance and updates.
Higher oil prices have raised concerns about the strength of the economic recovery. A $10 increase in oil prices could reduce real GDP growth by 0.2 percentage points, and a sustained rise in prices could shave 0.5 to 1.0 percentage points off growth. Meanwhile, state and local governments face budget strains and are cutting jobs, weakening the recovery. Congress has yet to pass any of the 13 appropriations bills to fund the government, risking a shutdown as the current resolution expires on March 4th.
Daily i forex-report-28-may-2018-by-epic-researchEpic Research
Enter the Most Liquid Market in the World which have four pairs for trading EUR/USD(Euro), USD/JPY(Japanese Yen), GBP/USD(Pound), USD/CHF(swiss franc).This report will compare the INR with all major pairs, free valuation according to 3 supports & 2 resistance. Forex trading can be a life changer for you.Start investing in Nifty call now.
Consumer price growth in Latvia continued to decline rapidly in May 2012, falling 0.2% month-over-month and 2.2% year-over-year as food, clothing, and household equipment prices rose more slowly than expected. Annual inflation is forecast to continue decreasing through June and potentially meet the Maastricht inflation criterion in early 2013, though planned tax cuts could push inflation lower than current forecasts. Overall the economic commentary from Swedbank expects Latvia's consumer price inflation to average 2.8% for the year.
This weekly commentary discusses the March employment report and the state of the US labor market. It notes that while private sector job growth is occurring, the pace of around 230,000 new jobs per month is still short of the 300,000 needed each month to make up ground lost during the recession. Unemployment has fallen but this is partly due to people dropping out of the labor force. Wage growth remains sluggish and has not kept up with inflation. Overall the job growth is a positive sign but still far from sufficient to fully recover from the recession.
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Inflation remains dangerously low in both the Eurozone and US, below central bank targets of 2%. With weak growth expected in Europe and disappointing recent data in the US, central banks are likely to keep monetary policy loose and interest rates low to guard against deflation. The European Central Bank and Federal Reserve may take further actions like interest rate cuts or adjustments to quantitative easing programs to stimulate growth and boost inflation closer to their targets. Low inflation and weak economies present a strong case for central banks to continue loose monetary policies, implying that interest rate increases are still some way off in both regions.
The Federal Reserve raised interest rates for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and
strengthening job market. In lifting its benchmark lending rate by a quarter percentage point to a target range of
- In March 2012, consumer prices in Latvia increased 0.6% compared to the previous month and 3.3% compared to a year ago, a continued deceleration in annual inflation.
- The main drivers of monthly inflation were food, transport, and clothing prices, while annual inflation was highest for housing and transport.
- Higher global oil prices are expected to increase natural gas and heating tariffs in the coming months, but inflation is still forecast to fall further in April when electricity price increases from a year ago drop out of the annual calculation. Overall inflation for the year is expected to be revised up slightly from the previous forecast of 2.4%.
The document summarizes the economic outlook for the United States. It notes that the US economy slowed significantly in 2007 and weakened further in early 2008 due to the ongoing housing correction and tightening credit. Key uncertainties around the length of the economic downturn include the future path of house prices and the impact of the financial sector crisis on households and businesses.
Metropolitan Washington Lenders Conference 111408caesar7
The document summarizes the current state and outlook of the US economy, housing market, and mortgage markets. It finds that (1) foreclosure rates are rising across the nation as unemployment rises, (2) house price depreciation is slowing but risks remain, and (3) excess housing supply is declining in most areas. Looking forward, it expects a recession in late 2008 and early 2009 before a modest economic rebound, with housing sales flattening in 2008 before a gradual recovery in 2009-2010 as unemployment decreases and prices stabilize. Credit markets will remain constrained until 2009 when additional Fed and Treasury actions stabilize financial markets.
The Federal Open Market Committee, the Fed’s policymaking arm, will meet on November 2-3. Clearly, there are some differences of opinion among senior Fed officials regarding the appropriate path for monetary policy. However, the dissenters (those wanting to do less) are a small minority. The FOMC will come together with a somewhat less troublesome near-term economic outlook (no recession in the near term), but there are more concerns about growth in 2012.
August Jobs Report- No Sign of a Double DipJeff Green
As with most of the recent data reports, the August Employment report was consistent with a near-term slow patch in economic growth, but not a double dip. Private-sector growth in nonfarm payrolls remained positive, and figures for the previous two months were revised higher. However, while the job numbers were better than expected, the pace is nowhere near where we’d like it to be.
The recent data have been mixed, consistent with a slower rate of economic growth in the near term. The economy faced a number of headwinds in the first half of the year. Some of those headwinds are likely to be temporary. Others will linger. Growth should pick up in the second half of the year, but the pace seems unlikely to be especially strong
In the last few months, some have taken to calling the current economic period, “the Lesser Depression” (instead of “the Great Recession”). There’s no precise definition of “a depression” (and as it is, the definition of “a recession” is rather vague). Most economists would say a depression is a lengthy period of elevated unemployment. That’s exactly what we may be staring out now. Monetary and fiscal policy could provide further support for growth, but there’s a lot of resistance.
Shares Rebound On U.S. Budget Talk, Yen FallsNeil Hendry
World equity markets and oil prices rebounded after U.S. House Republicans announced plans to seek a short-term deal to raise the debt ceiling. Consumer sentiment in the U.S. fell to its lowest level in over a year, adding pressure on stocks. The yen fell ahead of potential new asset purchase measures by the Bank of Japan aimed at achieving a 2% inflation target.
Last week saw broad weakness in US equities and higher yields for global sovereign bonds. The dollar strengthened due to increased expectations of a December Fed rate hike, pressuring gold and bonds which had seen speculative long positions. Economic data was mixed with a stronger auto sales figure but weaker employment growth. Outside the US, emerging market stocks and bonds outperformed despite dollar strength. Going forward, analysts expect the sixth straight quarter of declining corporate profits in the US.
The advance estimate of fourth quarter GDP growth was close to expectations, however two major components, net exports and inventory changes, were larger than anticipated and had opposing impacts. Slower inventory growth subtracted from GDP growth while an improvement in the trade deficit added to GDP growth. The inventory correction in the fourth quarter may have been excessive and production is expected to increase in early 2011 as inventories are lean. Stronger consumer spending in the fourth quarter was fueled by a drop in the savings rate, and disposable income will be boosted in the first quarter of 2011 by a reduction in payroll taxes. Overall GDP growth in the first half of 2011 is now estimated to be higher than previously expected.
Dear All,
The credit rally is cooling off, equity markets are continuing to rise and geopolitical tensions remain.
We still believe 2018 will be a year of synchronised growth, accomodative monetary policies (ECB, PBOC, BoJ) where earnings growth will support equity valuations.
Please find our CIO's Investment Outlook for financial markets in 2018.
We wish you a prosperous new year.
Kindest Regards
Growth in household credit balances increased in 2017 after slowing in 2016. Secured credit grew 4.1% in 2017 compared to 2.3% in 2016, driven by higher mortgage and vehicle finance growth. Unsecured credit also grew faster in 2017 at 3.1% after contracting in 2016, as personal loans and credit card balances increased. Mortgage balances grew 3.5% in 2017, with the housing market seeing modest growth. Forecasts indicate household credit may grow around 3.5% in 2018.
Epic Research is a leading financial advisory firm. We offer various financial services and a daily report on different segments of market. So that the traders and investors can get the overview of market's performance and updates.
Higher oil prices have raised concerns about the strength of the economic recovery. A $10 increase in oil prices could reduce real GDP growth by 0.2 percentage points, and a sustained rise in prices could shave 0.5 to 1.0 percentage points off growth. Meanwhile, state and local governments face budget strains and are cutting jobs, weakening the recovery. Congress has yet to pass any of the 13 appropriations bills to fund the government, risking a shutdown as the current resolution expires on March 4th.
Daily i forex-report-28-may-2018-by-epic-researchEpic Research
Enter the Most Liquid Market in the World which have four pairs for trading EUR/USD(Euro), USD/JPY(Japanese Yen), GBP/USD(Pound), USD/CHF(swiss franc).This report will compare the INR with all major pairs, free valuation according to 3 supports & 2 resistance. Forex trading can be a life changer for you.Start investing in Nifty call now.
Consumer price growth in Latvia continued to decline rapidly in May 2012, falling 0.2% month-over-month and 2.2% year-over-year as food, clothing, and household equipment prices rose more slowly than expected. Annual inflation is forecast to continue decreasing through June and potentially meet the Maastricht inflation criterion in early 2013, though planned tax cuts could push inflation lower than current forecasts. Overall the economic commentary from Swedbank expects Latvia's consumer price inflation to average 2.8% for the year.
This weekly commentary discusses the March employment report and the state of the US labor market. It notes that while private sector job growth is occurring, the pace of around 230,000 new jobs per month is still short of the 300,000 needed each month to make up ground lost during the recession. Unemployment has fallen but this is partly due to people dropping out of the labor force. Wage growth remains sluggish and has not kept up with inflation. Overall the job growth is a positive sign but still far from sufficient to fully recover from the recession.
Capitalstars Financial Research Private Limited(SEBI Registered, CRISIL-NSIC Rated , ISO Certified) is a research house where we provide calls for traders which include tips like Stock Tips, Commodity Tips, MCX Tips, Equity Tips and Intraday Tips also we provide free trials for better Satisfaction.
For More Information Call On 9977499927.
Epic Research offers perfect Forex Signals for their clients that gives accurate results. Our research team with its past experience prepares live charts and track-sheets of Forex Signals through which traders can earn maximum profit from the market place. This report helps you to achieve desired success in the Bursa Malaysia Stocks.
Inflation remains dangerously low in both the Eurozone and US, below central bank targets of 2%. With weak growth expected in Europe and disappointing recent data in the US, central banks are likely to keep monetary policy loose and interest rates low to guard against deflation. The European Central Bank and Federal Reserve may take further actions like interest rate cuts or adjustments to quantitative easing programs to stimulate growth and boost inflation closer to their targets. Low inflation and weak economies present a strong case for central banks to continue loose monetary policies, implying that interest rate increases are still some way off in both regions.
The Federal Reserve raised interest rates for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and
strengthening job market. In lifting its benchmark lending rate by a quarter percentage point to a target range of
- In March 2012, consumer prices in Latvia increased 0.6% compared to the previous month and 3.3% compared to a year ago, a continued deceleration in annual inflation.
- The main drivers of monthly inflation were food, transport, and clothing prices, while annual inflation was highest for housing and transport.
- Higher global oil prices are expected to increase natural gas and heating tariffs in the coming months, but inflation is still forecast to fall further in April when electricity price increases from a year ago drop out of the annual calculation. Overall inflation for the year is expected to be revised up slightly from the previous forecast of 2.4%.
The document summarizes the economic outlook for the United States. It notes that the US economy slowed significantly in 2007 and weakened further in early 2008 due to the ongoing housing correction and tightening credit. Key uncertainties around the length of the economic downturn include the future path of house prices and the impact of the financial sector crisis on households and businesses.
Metropolitan Washington Lenders Conference 111408caesar7
The document summarizes the current state and outlook of the US economy, housing market, and mortgage markets. It finds that (1) foreclosure rates are rising across the nation as unemployment rises, (2) house price depreciation is slowing but risks remain, and (3) excess housing supply is declining in most areas. Looking forward, it expects a recession in late 2008 and early 2009 before a modest economic rebound, with housing sales flattening in 2008 before a gradual recovery in 2009-2010 as unemployment decreases and prices stabilize. Credit markets will remain constrained until 2009 when additional Fed and Treasury actions stabilize financial markets.
The Federal Open Market Committee, the Fed’s policymaking arm, will meet on November 2-3. Clearly, there are some differences of opinion among senior Fed officials regarding the appropriate path for monetary policy. However, the dissenters (those wanting to do less) are a small minority. The FOMC will come together with a somewhat less troublesome near-term economic outlook (no recession in the near term), but there are more concerns about growth in 2012.
August Jobs Report- No Sign of a Double DipJeff Green
As with most of the recent data reports, the August Employment report was consistent with a near-term slow patch in economic growth, but not a double dip. Private-sector growth in nonfarm payrolls remained positive, and figures for the previous two months were revised higher. However, while the job numbers were better than expected, the pace is nowhere near where we’d like it to be.
The document discusses the risks of tightening policy too early in an economic recovery from a financial crisis. It notes that recoveries from financial crises are typically long and gradual. While bank lending and credit availability are improving, which should help support business expansion and hiring, policymakers face challenges. Premature fiscal tightening by the government could put the recovery at risk, as seen at the state and local levels. The Federal Reserve also faces a difficult decision around further monetary easing measures. Overall, the recovery continues but policy mistakes could undermine progress.
Research on past recessions shows that downturns that are caused by financial crises tend to be more severe, longer lasting, and with more gradual recoveries than a typical recession. The current recovery is playing out largely as anticipated. The economy is improving, although the labor market remains weak. That should be no surprise to anyone.
The document discusses the debt ceiling crisis in the US. It notes that credit rating agencies have threatened to downgrade US debt if the ceiling is not raised. While markets have not reacted strongly yet, failure to raise the ceiling could cause serious financial problems. The crisis is largely manufactured for political reasons rather than being about long term budget issues, which will still need addressing. Failure to pay obligations due to not raising the ceiling would have severe unintended consequences.
The January Employment Report was odd. Nonfarm payrolls rose by a disappointing 36,000, but weather and seasonal adjustment added a considerable amount of uncertainty to the establishment survey data. The unemployment rate fell sharply (to 9.0%, from 9.4% in December and 9.8% in November). However, the household survey figures are suspect. The employment-population ratio, a better measure of the amount of slack in the labor market, has been little changed over the last year. Still, the report was consistent with a pickup in the pace of the economic recovery in the near term.
The recent economic data have been disappointing, but hardly a disaster. The broad range of indicators suggest a slowing in the pace of growth – not a contraction. One month does not a trend make, but the data have generated some anxieties about whether the current slow patch could be a lot longer lasting or turn into something more severe.
The economic data this week showed signs that the U.S. and global economies have stabilized and possibly bottomed out. Retail sales are expected to rise significantly due to the "Cash for Clunkers" program. Upcoming reports on retail sales, consumer prices, and other economic indicators next week could generate market reactions. Financial markets continued higher despite thin economic data, perhaps waiting for stronger confirmation of recovery.
Despite a round of better-than-expected economic news, stock market indices negatively reversed, from up to down, yesterday and ended with losses. Profit-taking due to the end of the month, the quarter, and fiscal year for some mutual funds combined with a failed intraday breakout after “resistance” stood its ground and an overbought situation [please refer to the chart titled: “Percentage of NYSE stocks above their 10 week (50-day) moving average”] helped aid yesterday’s negative reversal. After being up 115 points at the open, the DJIA ended lower by 47 points; the NASDAQ recorded a similar reversal and closed down eight points. The S&P 500 and the DJIA both enjoyed their best “September” since 1939, rallying 9% and 8%, respectively. The NASDAQ surged 12% last month.
The American Taxpayer Relief Act of 2012Jeff Green
The new year began with some political drama, as last-minute negotiations attempted to avert sending the nation over the "fiscal cliff." Technically, we actually did go over the cliff, however briefly, as a host of tax provisions and automatic spending cuts took effect at the stroke of midnight on December 31, 2012.
The Federal Open Market Committee’s expectation that economic conditions are likely to warrant exceptionally low levels of the federal funds rate “for an extended period” is conditional on three things: low rates of resource utilization (an elevated unemployment rate and a low level of capacity utilization), subdued inflation trends, and stable inflation expectations.
To us, inflation is assuredly returning, yet the degree of inflation is unknowable. Why are we so sure inflation will return? It is because for decades that has been the easiest political solution for the debt accumulation of our citizenry and our government. To wit, pay back the debt with “cheaper” dollars.
The Federal Open Market Committee will meet on Tuesday to set monetary policy. The Fed is widely expected to leave short-term interest rates unchanged and the wording of the economic assessment should be largely the same as in the previous statement. However, we could see another round of asset purchases or some changes to the Fed’s communications.
This document is a weekly commentary by Dr. Scott Brown discussing inflation and the Federal Reserve. It notes that while deflation seemed a threat a year ago, energy price increases have boosted consumer prices over the last 12 months. However, core inflation remains low thanks to weak housing rents. The Federal Reserve has signaled keeping interest rates low for an extended period given high unemployment, low core inflation, and stable expectations. Measures of core inflation like the core PCE index remain at low levels, suggesting no need for the Fed to raise rates soon despite some calls for higher rates. Higher energy prices pose a risk but are more a drag on growth than a driver of higher underlying inflation.
The advance figure for fourth quarter growth surprised to the upside, although the story was largely as anticipated. The GDP data will be revised at the end of February and again in late March (and in perpetuity, in annual benchmark revisions). Don’t get too wedded to the numbers. However, the story is unlikely to change much in revision.
The Economic Outlook – In A Holding PatternJeff Green
The economic outlook remains lackluster with moderate growth expected in the near term and the risk of renewed recession depending on factors like gas prices, developments in Europe, and government policies. Recessions caused by financial crises are more severe and prolonged than typical downturns. While recent economic data is consistent with moderate growth, consumer spending has weakened due to higher food and energy costs reducing real income growth. Lower gas prices may provide more consumer spending boost later if sustained. The job market recovery is slow as seen in past recessions, with businesses reluctant to hire without sustained increased demand. The consumer outlook is mixed with spending not falling sharply but real income growth slowing.
Two clouds hung over the financial markets in the late summer: worries about a European financial crisis and concerns that the U.S. economy might be tipping back into recession. Real GDP rose at a 2.5% annual rate in the advance estimate for 3Q11, which should put to rest fears that the U.S. economy has already entered recession. However, there are still some important uncertainties in the growth outlook for 2012. European leaders dodged a bullet last week, with the agreement on Greek debt (failure would have triggered a more immediate crisis). However, they did not put a number of problems to bed completely. So, how long will the good feelings last?
One of the key themes for investors in early 2011 is likely to be a shifting economic picture. For the stock market, things tend to be all or none. That is, either the economy is booming or it’s falling apart – there’s not much ground in the middle. Investors seem to struggle with moderate and uneven economic growth. The tax cut package has taken the double-dip recession scenario off the table, but the data for the next few months are likely to be mixed, suggesting strong growth in one set of figures and more moderate growth in another. That back and forth should create some opportunities for investors.
The recent economic data have been generally weaker than expected, casting some doubt on the prospects for the recovery. However, economic recoveries are not usually associated with steady growth across sectors. Growth is inherently uneven. That means that some economic reports will be strong and some weak – and that is especially true in the current environment, where the economy has to deal with a number of serious headwinds. Economic statistics are also subject to seasonal adjustment difficulties and, as we’re likely to see in much of the February data, the peculiarities of the weather. Bad February weather will not cause a double dip, but it may add to the unease in the financial markets in the near term.
Commodity prices have risen sharply in recent months, leading some to worry about inflation. However, this document provides three reasons why inflation anxiety may be misplaced:
1) Higher commodity prices are primarily due to increased global demand from countries like China and India, as well as speculative factors related to low interest rates, rather than monetary policy.
2) The backdrop is very different from the 1970s, when high inflation became embedded - unions are less powerful and oil shocks no longer trigger wage increases.
3) Inflation expectations remain anchored and slack remains in the economy, so inflation pressures are unlikely in the foreseeable future despite recent commodity price rises, which are partly speculative and transitory.
The 1Q10 GDP report showed that:
- Real GDP grew at an annual rate of 3.2%, less than expected but details are more important.
- Consumer spending and business equipment investment rose strongly, though other components showed weakness.
- State and local government spending declined due to budget issues straining the economy.
- Inventories rose significantly after declines in recent quarters, but are unlikely to contribute as much to growth going forward.
- The report was mixed but reinforces the view of an improving economy, though headwinds from housing and state budgets remain.
The first part of December is a busy time for economists. People want to know what’s going to happen in the coming year. However, nobody’s clairvoyant. Forecasts are certain to be wrong. We can only tell you what to expect. The outlook for 2011 has been especially challenging, as the ground has been shifting under our feet. The tax proposal, the rout in bonds, and simmering concerns about Europe would seem to have significant impacts on the growth outlook, and they do. However, as with any economic recovery, positive forces battle it out with negative forces, with the positive force eventually dominating. Along the way, the pace is typically uneven across time and across sectors. That implies some volatility in the markets as investors debate the strength of the recovery.
The core CPI rose just 1.1% over the last year, at the low end of the Fed's target range and raising concerns about possible deflation. While deflation is still unlikely, recent disinflation should get the Fed's attention. Nearly half of the items in the CPI have seen flat or lower prices in the last year. The Fed has tools like purchasing Treasury securities to fight deflation, as it did last year, and will likely continue its efforts to ensure prices don't fall broadly. Higher budget deficits are not inherently inflationary, as much of the recent rise has been due to temporary recession-related factors, but long-term efforts to reduce deficits will be difficult. Inflation is
The November Employment Report was disappointing. The stock market had set its sights high, anticipating stronger growth in nonfarm payrolls and a steady unemployment rate. Moreover, market participants seemed to be hoping for an upside surprise relative to the consensus forecast. The holiday shopping season apparently got off to a strong start, but that failed to translate into a corresponding jump in retail employment (at least, on a seasonally adjusted basis). Manufacturing jobs were soft. State and local government continued to shed jobs, reflecting budget strains. What’s in store for 2011? The November jobs data aren’t encouraging, but the recovery is likely to remain on track.
The document discusses concerns about high levels of government debt in the U.S. and abroad. While efforts will need to be made eventually to reduce deficits, acting too soon could weaken the economic recovery. Looking ahead, there are no easy solutions to addressing government debt issues. The federal budget deficit has soared during the recession due to falling tax revenues and temporary spending programs, but deficits are justified during severe recessions to allow time for private sector recovery. However, the deficit will need to decrease as a percentage of GDP over time as the economy improves. The larger long-term worry is the outlook for programs like Social Security.
1) The document discusses concerns about excessive fiscal tightening hindering economic recovery from financial crises which typically involve long recovery periods as balance sheets are repaired.
2) It notes that past recessions associated with financial crises saw policy tightened too soon, slowing recovery, and that increased taxes and government spending cuts have recently shaved US GDP growth and job levels.
3) While deficit reduction is important long-term, the document argues that short-term austerity measures are "bad economics" and risk derailing economic recovery.
The document summarizes key points from a weekly commentary by Dr. Scott Brown on the US GDP report for the second quarter of 2010:
1) Real GDP growth of 2.4% matched expectations but details were mixed, with imports subtracting from growth while domestic final sales rose at a stronger 4.1% pace.
2) Revisions to past GDP data showed the recession was worse than previously reported, while consumer savings rates were also revised higher, consistent with recent restrained consumer spending growth.
3) Inventories rose at an unsustainable pace in Q2, suggesting some unintentional accumulation, consistent with mixed conditions in manufacturing. The report signaled an expected near-term slowdown in
The Economic Outlook – In A Holding PatternJeff Green
Recent economic figures have been consistent with the view of lackluster-to-moderate growth in the near term – not a recession, although the risk of a renewed downturn remains. Whether the U.S. slips back into recession depends on a number of factors: gasoline prices, developments in Europe, and policies that may or may not come out of Washington, D.C.
The job market outlook – recovery still on trackJeff Green
The May employment report showed mixed results, with a disappointing gain of 41,000 private sector jobs but strong gains in the prior two months. While job growth needs to be stronger to significantly reduce unemployment, the recent trend in private sector job growth looks adequate for steady economic growth. Several details were positive, such as rising average weekly hours and earnings, but headwinds remain like weakness in small business lending. Overall the recovery in the job market is still on track, though it will be a gradual process.
The Job Market Outlook – Recovery Still on TrackJeff Green
The May Employment Report was mixed. As expected, payrolls were boosted by a sharp rise in temporary jobs for the 2010 census (up by 411,000, to 564,000 – most of these jobs will be shed by October).
The September employment report showed mixed results, with private sector job growth near expectations but overall growth still below desired levels. State and local government jobs declined sharply. While there is no sign of a double-dip recession, the data is consistent with subpar economic growth. Fiscal policy will not provide support and may tighten next year, so the Fed will likely pursue more quantitative easing to support growth in 2011. The unemployment rate held steady but there was a large increase in involuntary part-time employment, indicating continued weakness in the labor market.
Weekly Market Snapshot, September 25, 2009Jeff Green
Recent economic data were mixed and somewhat disappointing, but still consistent with a gradual economic recovery. In August, the Index of Leading Economic Indicators rose for a fifth consecutive month. Existing home sales slipped 2.7% in August, following a 15.2% rise over the four previous months. New home sales rose in August, but less than expected.
Sequestration refers to $1.2 trillion in automatic, across-the-board spending cuts to federal agencies from 2013 to 2021 split evenly between defense and nondefense programs. Congress created sequestration in 2011 to address the debt ceiling, with the goal of replacing the cuts, but failed to do so. The cuts will reduce defense spending by 8% and nondefense by 5-6%, excluding Social Security, Medicaid, Medicare and payments to providers by more than 2%. In addition to potential layoffs, all federal agencies will implement cost-saving measures beginning March 1st.
Time Running Out for Large Gifts in 2012Jeff Green
Currently, the exemptions for federal gift tax, estate tax, and generation-skipping transfer (GST) tax are at historic highs, and the gift, estate, and GST tax rates are at historic lows. But, in 2013, the exemptions are scheduled to substantially decrease, and the tax rates are scheduled to substantially increase. This raises the question of whether 2012 might be a good time to make large gifts that take advantage of the current large exemptions while they are still available.
What is the "fiscal cliff"? It's the term being used by many to describe the unique combination of tax increases and spending cuts scheduled to go into effect on January 1, 2013. The ominous term reflects the belief by some that, taken together, higher taxes and decreased spending at the levels prescribed have the potential to derail the economy. Whether we do indeed step off the cliff at the end of the year, and what exactly that will mean for the economy, depends on several factors.
What Does the Supreme Court Ruling on the Health-Care Reform Law Mean for You?Jeff Green
On June 28, 2012, the U.S. Supreme Court ruled, in a landmark decision, that the Patient Protection and Affordable Care Act (ACA), including the provision that most Americans carry health insurance or pay a penalty, is constitutional.
It's no secret that what's happening in Europe is driving financial markets worldwide. Even if you have a sound asset allocation strategy and a well-diversified portfolio, it's hard to ignore the fact that this summer seems to have the potential for turbulence. Markets dislike uncertainty, and at this point uncertainty is high, particularly in advance of the June 17 elections scheduled in Greece.
The S&P 500 has failed to hold gains above 1366 on two occasions recently, suggesting downside potential in the near term. The author expects the S&P 500 to decline to test its 38.2% retracement level between 1330-1320 in the coming week before finding support and rebounding from this area, marking the near term bottom of this correction. The document provides contact information for Jeffrey Green of Green Financial Group and notes that any opinions expressed are those of Mr. Green.
Background
As 401(k) plans have become more popular, plan participants have become increasingly responsible for making their own retirement savings decisions. The Department of Labor (DOL) has become concerned that participants in self-directed 401(k) plans (those that allow participants to direct the investment of their own accounts) might not have access to, or might not be considering, information critical to making informed decisions about the management of their accounts--particularly information on investment choices, fees, and expenses.
Loan growth plays a key role in economic expansion. Simply put: no loan growth, no economic growth. However, there’s a downside. Debt doesn’t matter until it does. Debt has played a key part in the economic downturn and in the gradual recovery. Europe’s sovereign debt crisis has continued to escalate, with no easy way out. In the U.S., the government has borrowed more, but the markets have not punished it for doing so. There’s no sign that that is going to change anytime soon.
A positive sign that has come as a result of the back and forth action in the markets over the past couple of weeks is the emergence of a triangle pattern in the S&P 500 (SPX). A triangle pattern, in and of itself, is neither a bullish pattern nor a bearish pattern until the pattern has completed.
Faster than a speeding tortoise, more powerful than suntan lotion, unable to leap small objects in a single bound – the Joint Select Committee on Deficit Reduction (aka “the super committee”) is stumbling toward its November 23 deadline.
Later this month, the government will release the advance estimate of 3Q11 GDP growth. There are uncertainties in that estimate – inventories and foreign trade make up a relatively small part of the economy, but account for much of the quarterly variation in GDP growth. We already have a good idea regarding the “meat and potatoes” of that report. Consumer spending and business fixed investment expanded further in the third quarter, suggesting no recession in the near term. However, the economic outlook for 2012 is a lot less clear.
S&P downgraded the US credit rating from AAA to AA+ based on their view that the recent fiscal plan agreed to by Congress and the administration will not stabilize the country's medium-term debt dynamics. The outlook on the long-term rating is negative and S&P could further lower the rating if debt trajectories are higher than currently expected. While the downgrade may lead to higher borrowing costs, its effects are uncertain and the US debt is still considered safe. Secondary impacts through related markets like money market funds and banks' agency debt holdings could be significant.
The document discusses the potential impacts of the U.S. reaching its debt ceiling and not reaching an agreement to raise it. It notes that failure to raise the debt ceiling could lead to default on Treasury securities, damage the country's credit rating, increase borrowing costs, and force the Treasury to prioritize which bills to pay. It outlines various deadlines and payments in August, including for Social Security benefits, military pay, and Treasury debt, that could be impacted by failure to raise the debt ceiling. The outlook for reaching an agreement is unclear as various proposals have been discussed but none have gained full bipartisan support.
Is there a fate worse than debt? If there is, it seems to be not dealing with the debt. When there is too much leverage in the system, there is always a risk that things go wrong quickly and unexpectedly. Ken Rogoff and Carmen Reinhart have an op-ed piece on Bloomberg today about the debt overhang and its implications for economic growth. They are among the few commentators who have been consistently correct about the path of the financial crisis, probably because they are among the few who have studied the actual data.
The June Employment Report was disappointing. Nonfarm payrolls rose less than expected. Figures for April and May were revised lower. Average weekly hours declined. Temp-help employment fell. There were no bright spots. That doesn’t mean that the economy won’t recover in the second half, but headwinds will prevent growth from being a lot stronger.
- The document discusses key considerations for income tax planning in 2011. Tax rates and brackets will remain the same as 2010 through 2012. The alternative minimum tax exemption amounts are known for 2011 but uncertain for 2012.
- There is a temporary 2% reduction in Social Security payroll taxes for employees and self-employed individuals in 2011 only.
- 2011 is the last year individuals over 70.5 can exclude qualified charitable distributions from IRAs from income. Bonus depreciation and Section 179 expensing amounts phase down after 2011.
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Weekly Commentary by Dr. Scott Brown
Bernake’s World And Ours Too
May 2 – May 6, 2011
There were no fireworks at Fed Chairman Bernanke’s first post-FOMC press briefing. For the financial
markets, it was a straight-forward and relatively dull outing. It reinforced prior notions, but we did learn a
few things.
All five Fed governors and 12 district bank presidents contributed revised forecasts of growth,
unemployment, and inflation last week. The central tendency forecasts exclude the three highest and
three lowest projections. Fed officials lowered their outlook for GDP growth this year, but not by a lot,
reflecting a slower than anticipated rate of growth in the first quarter. Unemployment is expected to
decline gradually. Inflation will be higher this year, but the Fed continues to expect that commodity price
pressures will be transitory. The Fed’s long-term goal for inflation has 2% as the upper limit.
2. 2011 2012 2013 longer run
Real GDP 3.1% - 3.3% 3.5% - 4.2% 3.5% - 4.3% 2.5% - 2.8%
Jan. Proj. 3.4% - 3.9% 3.5% - 4.4% 3.7% - 4.6% 2.5% - 2.8%
Unemp. Rate 8.4% - 8.7% 7.6% - 7.9% 6.8% - 7.2% 5.2% - 5.6%
Jan. Proj. 8.8% - 9.0% 7.6% - 8.1% 6.8% - 7.2% 5.0% - 6.0%
PCE Prices 2.1% - 2.8% 1.2% - 2.0% 1.4% - 2.0% 1.7% - 2.0%
Jan. Proj. 1.3% - 1.7% 1.0% - 1.9% 1.2% - 2.0% 1.6% - 2.0%
Core PCE 1.3% - 1.6% 1.3% - 1.8% 1.4% - 2.0%
Jan. Proj. 1.0% - 1.3% 1.0% - 1.5% 1.2% - 2.0%
Bernanke said “the substantial ongoing slack in the labor market and the relatively slow pace of
improvement remain important reasons that the FOMC continues to maintain a highly accommodative
monetary policy.” That doesn’t mean the Fed is relaxed. Officials will continue to monitor inflation
expectations and possible second-round effects from higher oil prices.
Bernanke gave no indication that short-term interest rates would be heading higher anytime soon. Asked
to define what constitutes “an extended period,” he did not suggest any specific time period, but noted
that it’s conditional on resource slack, a subdued trend in underlying inflation, and stable inflation
expectations. “Once we move away from those conditions, that’s the time we need to begin to tighten.”
3. When asked about the impact of the end of the Fed’s asset purchase program, Bernanke repeated that the
$600 billion program will be completed at the end of the current quarter, “without much
tapering,” adding that, in the Fed’s view, “the end of the program is unlikely to have significant impacts on
the financial markets or on the economy.” The end of the program has been well advertised. Moreover, the
Fed has what’s called a stock view of the effects of securities purchases –“what matters primarily for
interest rates, stock prices, and so on is not the pace of ongoing purchases, but rather the size of the
portfolio the Fed holds.” At this point the Fed intends to keep the size of its portfolio unchanged by
reinvesting maturing securities into long-term Treasuries. At some point, the Fed will stop such
reinvestments, which will be a tightening of monetary policy.
Asked about the impact of higher gasoline prices on growth and inflation, Bernanke admitted that there
was not much the Fed could do about gasoline prices – “at least, not without derailing growth entirely,
which is certainly not the right way to go.” After all, Bernanke said, “the Fed can’t create more oil.” What
the Fed can do, he said, is to try to keep higher gasoline prices from passing through to other prices and
wages, “creating a broader inflation which would be more difficult to extinguish.” The Fed anticipates that
gasoline prices will stabilize or even come down, but will continue to watch developments carefully.
What about the possibility of further asset purchases down the road? Bernanke has been criticized by
some for not doing enough to reduce unemployment. Bernanke countered that the Fed has already done a
lot, including all the extraordinary policy steps it took during the financial crisis and two rounds of asset
purchases. Bernanke emphasized that the Fed also has to worry about inflation. “If inflation expectations
become unmoored and inflation were to rise significantly, the employment loss in the future would be
quite significant.” That justification did not appease the Fed’s critics. It’s a judgment call.
The bottom line is that the Fed doesn’t expect to tighten anytime soon (hence, a softer dollar) and it
doesn’t expect to ease monetary policy either (no QE3). Future monetary policy decisions will depend on
the evolution of the outlooks for unemployment and inflation, but there’s nothing on the immediate
horizon to trigger any change in the near term.