6/21/24 – Pretty soon you’re talking real money
A mid-week U.S. holiday, summer vacations, and noisy economic data all led to mostly unchanged bond and stock markets this week. For the week, the 2-year/30-year yield curve was 2.5 basis points less inverted, closing the week at -33.5 basis points, with the entire move coming from a marginal drop in the yield-to-maturity of the 30-year bond. The S&P 500 briefly traded into record territory but is closing the week about 1% off of the 5,505.53 record touched on Thursday.
The details of May retail sales report were disappointing. The month-over-month headline change was 0.1%, below the 0.3% expectation and the previous month’s outcome was revised to -0.2% from 0.0%. However, digging into the details, from a year-over-year perspective headline retail sales rose 2.3% on a seasonally adjusted basis, modestly better than the headline characterized them, but not keeping up with the YOY inflation rate.
Housing starts in May plunged to the lowest level since June 2020, when covid-panicked workers brough the industry to a screeching halt. The existing home sales report noted that the median existing-home sale price hit a record at $419,300, 5.8% higher than that recorded last year. That’s going to factor into the Fed thinking on inflation and likely to be one of the factors as to when the Fed cuts the overnight rate.
To round out the mixed economic data on a positive note, the S&P purchasing managers index rose to 54.6. It was as low as 44.6 last autumn, so the improvement has been meaningful. We caution not to read too much into this measure though, as it can change direction and magnitude rapidly.
Finally, The Congressional budget office revised its deficit forecast for fiscal year 2024 this week to $1.9 trillion, up from $1.5 trillion earlier this year. Obviously, that’s going to force the Treasury Department to figure out how to pay for it. We’re going to take a wild guess and say more Treasury issuance. It takes the quote “a billion here and a billion there, and pretty soon you’re talking real money” to a whole new level.
This commentary is being provided by Halyard Asset Management, L.L.C. and its affiliates (collectively “Halyard” or “we”) for informational and discussion purposes only and does not constitute, and should not be construed as, investment advice, or a recommendation with respect to the securities used, or an offer or solicitation, and is not the basis for any contract to purchase or sell any security, or other instrument, or for Halyard to enter into or arrange any type of transaction as a consequence of any information contained herein. Although the information herein has been obtained from public and private sources and data that we believe to be reliable, we make no representation as its accuracy or completeness. The views expressed herein represent the opinions of Halyard Asset Management, LLC, or any of its affiliates, and are not intended as a forecast or guarantee of future results. Past performance is not indicative of future results.
