Tonight the Reserve Bank of Australia is expected to hike interest rates by 50 bps to 1.85% and the Bank of England is expected to do the same on Thursday to 1.75%. Now that central banks outside of the Fed have picked up the pace of their monetary tightening, including the ECB, the US dollar has topped out for now. So, was the large dollar rally over the past year …
Succinct Summation of the Week’s Events – 7/29
Positives 1)The Fed continues on their path to conquer high inflation. 2)This is only on the positive side because off a record low in June of 50, the final July UoM consumer confidence was up 1.5 pts in July all due to the rise in Current Conditions. Expectations fell further, albeit a touch. One yr inflation expectations were 5.2%, the same as the initial …
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Inflation, income, spending, & wage growth
The headline PCE inflation figure for June was up by 1% m/o/m, one tenth more than expected. For context, there once was a time when it was up 1-2% during an entire year. The core rate was higher by .6% m/o/m, also one tenth more than estimated. Versus last year the headline increase was 6.8% and by 4.8% for the core rate. AGAIN, the PCE has half the weighting in …
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A quick history lesson
I was reminded of a good history lesson from my good friend David Rosenberg yesterday on how markets react after the Fed stops its rate hiking cycle. "Remember this: the Fed went on hold in February 1989, and while there was a nice tradable rally, the reality is that the low in the equity market wasn't turned in until October 1990 - twenty months after the pause. The …
Q2 GDP, Claims data
So we now have the two quarters in a row of contraction that triggers the recession debate but I’ll argue again that it’s semantics at this point, especially with growth decelerating further in Q3 month to date. Much of the drop though in Q2, relative to expectations, on a real basis was the 7 tenths more than expected price deflator at 8.7%. If it came in line, Q2 …
Now in a pitch black room, hands out trying to find the walls
While some heard a dovish Powell and others a hawkish one, I heard someone who just doesn't know what happens next from here. He was confident in Q4 2018 of getting the fed funds rate to 3% but was stopped in his tracks at 2.5% as he buckled to the markets. This time of course has a different set of circumstances with inflation as high as it is and the economy either …
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The yawner before the presser
The FOMC statement was a big yawner with only modest changes to it relative to the June meeting. After saying in June that “Overall economic activity appears to have picked up after edging down in the first quarter,” they certainly backtracked on that as they should have. They started the statement instead with "Recent indicators of spending and production have …
Pending home sales plunge
Pending home sales in June plunged by 8.6% m/o/m, well worse than the estimate of down 1%. The index at 91 is the lowest since April 2020. A 40% two year increase in home prices and higher mortgage rates is the easy explanation. The NAR said “Nearly a quarter of buyers who purchased a home three years ago would be unable to do so now because they no longer earn the …
Stick save?
Reflecting what we’ve heard from retailers about excess inventory but also seeing other companies front load inventory build, just in case, retail inventories in June rose 2.1% m/o/m with a 3.3% rise in auto/auto parts and by 1.7% m/o/m for things ex that. Overall wholesale inventories grew by 1.9%, 4 tenths more than expected. To the just in case, if you didn’t see …
What next?
If inflation was not at 9% currently the Federal Reserve would be cutting interest rates today in order to cushion the economic slowdown that is now upon us. But of course they will be hiking by 75 bps which would take the fed funds rate to the peak level it saw in Q4 of 2018. As we all know what today will be about, it's what comes next that is the certain focus. …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.