Jackson Hole: Adventure Awaits – Halyard’s Weekly Wrap – 8/18/23

Retail Sales for July rose 1.0% over the previous month, much higher than the 0.4% that was expected, although pundits attributed the upside surprise to the Amazon Prime day which was hosted mid-month.  The worry is that those sales pulled forward future sales and there will be a giveback in August and September.  Looking back on the Prime Day effect on monthly retail sales shows no pattern of an uptick in the month of the sale and no pattern of a drop off in sales in the following month so we caution against assuming retail sales will drop in September and/or August.

At first glance housing starts for July looked decent, albeit at a severely depressed level, beating expectations by 2,000 units and rising 3.9% over June sales but that outcome belies the abysmal 36,000 revision lower in June.  Similarly building permits continue to print at the low end of the range and with mortgage rates topping 7% we don’t anticipate a meaningful uptick any time soon.

Reading through the minutes of the July 25-26 FOMC meeting we were surprised by a statement in the dealer’s survey; “Most survey respondents had a modal expectation that a July rate hike would be the last of this tightening cycle.”  Keep in mind that the dealers and the Fed communicate on a regular basis and if the dealers are of the opinion, then it’s likely coming from the Fed.  Aside from that one line, the minutes read as though the committee members were about to start their summer vacation and wanted to get out of Washington ASAP.

Looking ahead, the Federal Reserve Bank of Kansas City will hold its annual Jackson Hole, Wyoming gathering of Central bankers commencing next Friday August 24th.  With the global economies diverging and monetary policy at varying stages of tightness, it will be worth hearing what’s on the mind of the various Chairmen.  At last year’s confab Chairman Powell was all “fire and brimstone” in his forecast for the economic pain he expected ahead.  This year we’ll be listening for clues as to whether any additional rate hikes lie ahead.  We don’t expect him to declare “mission accomplished,” but we also don’t expect a repeat of last year’s dire forecast either.

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.