Halyard’s Weekly Wrap – 9/29/23

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Bonds were under intense selling pressure for most of this week in what could only be described as a delayed reaction to the “higher for longer” message delivered by Chairman Powell last week. The old 2-year note (August 2025 maturity) traded as high as 5.19% before closing the week at 5.11%. The 2-year/30-year yield spread continues to dis-invert, closing the week at -35 basis points.

With the rise in rates, the average mortgage rate hit a 23-year high of 7.31%, up from last week’s high of 7.19%. The rise in the cost of financing a home will offer no solace to the beleaguered housing market.

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Halyard’s Weekly Wrap – 9/22/23

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The FOMC left the Fed Funds lending rate unchanged, as was widely expected, and hinted there could be one more rate hike later this year. According to their interest rate graphic, the DOT plot, the committee anticipates another 0.25% rate hike later this year followed by a 0.50% rate cut in 2024. However next year’s expectation is the median forecast with committee members’ expectations running from 4.5% to 5.75%. The individual forecasts for 2025 are even more dispersed, ranging from 3.0% to 5.75%. In short, “higher for longer!” At the post-meeting press conference Chairman Powell was upbeat on the current state of the economy which leads us to conclude that he has become one of the more hawkish committee members.

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August 2023 – Monthly Commentary

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As expected, consumer prices rose in August, rising more than consensus expectation. The year-over-year measure of CPI registered 3.7%, up from 3.2% last month, but the core CPI for the same period fell from 4.7% to 4.3%. That’s far from the Fed’s 2% target but the anecdotal slowing in the economy is likely enough to keep the Fed on the sidelines at the September 20th FOMC meeting, but not enough call the current monetary policy the peak.

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Halyard’s Weekly Wrap – 9/15/23

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We wrote last week that the release of the consumer and producer price indices, retail sales and the Michigan surveys would be a litmus test for the Fed’s rate decision later this month. Unfortunately, the releases had a little something for everyone and didn’t offer definitive visibility on the outcome of next week’s FOMC meeting.

As expected, consumer prices rose in August, rising more than consensus expectation. The year-over-year measure of CPI registered 3.7%, up from 3.2% last month, but the core CPI for the same period fell from 4.7% to 4.3%. That’s far from the Fed’s 2% target but the anecdotal slowing in the economy is likely enough to keep the Fed on the sidelines at the September 20th FOMC meeting, but not enough call the current monetary policy the peak

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Halyard’s Weekly Wrap – 9/8/23

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Today we’ll look to the coming week, instead at the conclusion of the weekly wrap. The release of the consumer and producer price indices, retail sales and the Michigan surveys will be a litmus test for the Fed’s rate decision later this month. Comments from committee members seem to indicate that they will hold rates steady, but CPI and retail sales could prove problematic to that view. Recall that last month retail sales spiked, and many attributed the uptick to the Amazon prime-day sales. As such economists are looking for a month-over-month change of 0.1%. Anecdotally though, contemporaneous measures indicated that retailing continued to hum which could result in an above expectation result. More of a concern though is CPI. In June, the year-over-year measure plunged from 4.0% to 3.0%, giving the Fed some comfort that policy was moving in the right direction. Then the measure ticked up to 3.2% in July. Not a happy outcome but tolerable given that core inflation remained subdued. A similar outcome is expected next week, only economists are forecasting the YOY measure to tick up to an indefensible 3.6%. Rising energy costs will be the culprit but that’s not going to matter to consumers. The fact remains, the cost of filling the gas tank continues to hit our wallets.

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Halyard’s Weekly Wrap – 9/1/23

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Despite the muted volatility of the last unofficial week of summer, economic data released this week will likely keep the Fed on the sidelines later this month. The data was heavily focused on the labor market and the releases show a slowing in hiring. The Job openings measure (JOLTS) has plunged in the last wo months, falling from 9.6 million available and unfilled jobs to 8.8 million and well below the 12 million unfilled jobs touched last spring. Simultaneous with the JOLTS release, the conference board consumer confidence index fell from 114.0 to 106.1 as the uptick in confidence witnessed last month vanished.

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