Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
04/25/25 –
Regaining Stability
Capital markets seemed to be settling down this week as the chaotic news coming from Washington has subsided somewhat. For the week, the 2-year Treasury note closed 3 basis points lower and the 30-year Treasury bond was 6 basis points lower, bringing the 2-year/30-year yield curve back below 100 basis points. The flattening is a welcome signal that traders are expecting that inflation is going to be contained. The equity market also regained some stability, with the S&P 500 rallying nearly 4% over last Friday’s close. That gain comes despite a plethora of warnings and lower profit guidance from reporting companies.
Economic data for the week was mixed. Durable goods posted a robust month-over-month gain of 9.2%, but that was overwhelmingly due to a surge in aircraft orders. Excluding autos and aircraft, orders were mostly unchanged from the prior month.
The bright spot of the week was initial claims for unemployment insurance which rose by 8,000 to 222,000 from the prior week, hinting that next week’s non-farm payroll report will not result in a surge in unemployment. The consensus is for a gain of 140,000 new jobs in April, pushing off the tariff- and DOGE-related fears of an uptick in joblessness.
Also being released next week is the first look at Q1 GDP with the consensus of economists expecting growth of only 0.5%, down from 2.4% recorded in Q4. In a separate survey, 45% of 44 economists surveyed expected the economy to dip into recession in the coming 12 months.
The good news for the week is that President Trump has backed off (at least for the time being) from the threat of firing Fed Chairman Powell. Earlier this week it seemed as though he was exploring ways to do exactly that. While we’ve been critical of the Fed in the past, especially given their view of the inflation surge of 2022, we do give the committee credit for guiding the economy to a soft landing. Hopefully, The President has come to the realization that an independent Federal Reserve is necessary for economic stability.
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.
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Halyard’s Weekly Wrap – 8/2/24
/in Weekly Wrap/by halyardWe had two closely watched events this week, the FOMC rate decision and the monthly employment report, and neither disappointed in terms of market impact. As was widely expected, the FOMC left the overnight interest rate unchanged, with Chairman Powell strongly suggesting that a rate cut would be coming at the September meeting. Throughout his post-meeting press conference, he emphasized the Fed’s dual mandate of full employment and stable inflation. We interpret that as a concern that the employment backdrop has become a worry. The employment measures this week validated that concern.
Halyard’s Weekly Wrap – 7/26/24
/in Weekly Wrap/by halyardThe data this week was decidedly mixed – although the Bond market priced in further cuts. The Philadelphia non-manufacturing index plunged to -19.1 from the 2.9 recorded last month. Similarly, the Richmond Fed manufacturing index dropped to -17 from the -10 recorded last month. As expected, there was no joy to be found in the housing sector as existing and new home sales were both down for the month.
Halyard’s Weekly Wrap – 7/19/24
/in Weekly Wrap/by halyardThere was a host of Fed speakers this week including Chair Powell before the Economic Club of Washington DC. All of them reiterated the Chairman’s testimony before congress last week that they are pleased with the cooling inflation and somewhat concerned about the jobs market. Powell added that “he’s very happy doing the job” of Fed chair and that he’ll stay in office until his term ends in May 2026.
Halyard’s Weekly Wrap – 7/12/24
/in Weekly Wrap/by halyardThe highlight of the week was FOMC Chairman Powell’s dovish testimony on Capitol Hill. In describing the dual mandate of stable jobs and low inflation he said inflation has shown “modest further progress” and that labor markets had cooled “considerably.” We interpret that as meaning that a rate cut has once again been moved to the front burner of the FOMC’s agenda.
Halyard’s Weekly Wrap – 7/5/24
/in Weekly Wrap/by halyardToday caps off a holiday shortened week in the US that saw yields continue to fall across the curve. As we have been writing for quite some time, US economic data has been mixed and this week we saw a decided shift in surprises to the downside. Although, the headline Non-farm payroll number beat softened expectations – registering +206,000 for the month of June compared to the consensus of +190,000. The two-month downward revision subtracted 111,000 previously reported jobs, and private payrolls underwhelmed. The US unemployment rate now stands at 4.1% – up 0.6% from the January 2023 low of 3.4%.
Halyard’s Weekly Wrap – 6/28/24
/in Weekly Wrap/by halyardEarlier this week, the Federal Housing Finance Authority, the government regulator for Fannie Mae and Freddie Mac authorized Freddie to buy second mortgages. The intent of the agency is to make it cheaper for homeowners to tap home equity without refinancing their existing mortgage and thereby preserving the low-rate mortgages originated prior to the run up in rates. The program is an 18-month trial with Freddie authorized to buy up to $2.5 billion second mortgages. The purchases will be limited to second mortgages of $78,277 or less. Critics say that the program will be inflationary, which if it was done on a larger magnitude we would agree with, but with a $2.5 billion program cap, we doubt that will come to pass. On the other hand, it could be a slippery slope to a wider program and another government handout.