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 – 3/11/22
/in Weekly Wrap/by halyardThe bond market continues to suffer from the consistent selling pressure that commenced last fall. The rate rise has not been limited to the government bond market. Municipal bonds, Investment grade corporate notes and high yield bonds have all suffered losses. The price of the $35 billion Blackrock I-shares investment grade bond ETF (LQD), the vehicle many investment advisors utilize for their fixed income exposure, is down -9.25% year-to-date. Similarly, PIMCO’s MINT is down -0.79% and Blackrock’s NEAR is down -0.65% year-to-date. As with LQD, both are frequently used by investment managers as an alternative to holding cash.
Halyard’s Weekly Wrap – 03/04/22
/in Weekly Wrap/by halyardThe heighted volatility we saw last week intensified this week as bid/ask spreads widened and liquidity has begun to dry up. Volatility was elevated across the board with crude oil continuing to sky-rocket, developed foreign exchange showing marked weakness versus the U.S. dollar and equity volatility, as measured by the VIX index, closing the week at the high end of the recent range. Of course, the panicky market is a result of Russia’s declaration of war against the Ukraine. While the general population is aware of the market dislocations, the rise in the price of gasoline is a direct hit to their wallet and one that has the average citizen worried. As we close out the week, economic forecasters are attempting to back into the price of a gallon of gasoline should the global economy halt the import of Russian oil, and their forecasts are frightening. Estimates are as high as $150 to $200 per barrel of oil with gasoline topping out at $8 to $10 per gallon. Should the precious commodity rise to that level, we’re fairly confident that the U.S. economy will be in a recession. As it is, the Atlanta Federal Reserve’s GDP calculator is forecasting 0.041% economic growth in Q1 2022. We wonder how the investing public is going to react to 0% economic growth after enjoying 6 quarters of “eye-popping” economic growth fueled by emergency COVID stimulus. The first estimate of that growth comes at the end of April so we have plenty to worry about between now and then.
Halyard’s Weekly Wrap – 02/25/22
/in Weekly Wrap/by halyardSo…What a quiet week in the capital markets! As of now, bond yields have drifted higher and the yield curve flatter as investors contemplate the Fed’s upcoming rate hikes. Since last Friday the 2 year US Treasury Note yield has risen 14 basis points to round out the week at 1.61%, while the yield to maturity on the 10 year US Treasury Note rose 6bps to close Friday out at 1.99%. Stocks, as measured by the S&P500, rose for the week – closing around 60bps higher. Let’s digest that for a minute. Wait, Russia invaded the Ukraine on Thursday. Putin made his motive clear – demilitarize the Ukraine. The shock that move sent through the capital markets found the S&P down nearly 3% that day making its peak to trough (from Jan 4th high) down 14%. Safe haven assets rose – gold, and US Treasury Bond prices in particular. The money market space removed much of the probability of a 50bps move higher in fed funds. World leaders responded with sanctions and the Ukraine is fighting back. Apparently, that was enough for risk assets to rebound and put Putin’s actions in the review mirror. The S&P500 is up more than 6% from the low print this week.
Halyard’s Weekly Wrap – 02/18/22
/in Weekly Wrap/by halyardThe front end of the interest rate markets have priced in between 0.75% and 1.00% of tightening over the past several months. The one year US Treasury Bill has risen to 1.0% from 20bps in early December. The Two year US Treasury Note similarly has increased to 1.48% from around 50bps in December. The Two year note briefly traded above 1.60% at the end of last week as St. Louis Fed President Bullard began pounding the table for more immediate policy changes than the market had been expecting based on Powell’s measured and deliberate pace. Yields have fallen a touch since then – being walked lower by Ukraine – Russia geopolitical risks and the release of the FOMC January meeting’s minutes, which showed an inclination to move faster but no hint of an imminent 50 bps increase.
Halyard’s Weekly Wrap – 02/11/22
/in Weekly Wrap/by halyardThe biggest surprise this week wasn’t the shocking 7.5% rise in the Consumer Price Index over the last 12 months; although that was certainly an unpleasant surprise. Instead, the surprise is how quiet the markets are finishing the week. On the back of the outsized CPI, traders began to “whisper” that the Fed would preemptively raise rates Friday morning at 8:00 a.m. Validating that speculation, St. Louis Fed President Bullard was quoted as saying that he supported a 50 basis point rate hike in March and would like to see the Fed Funds rate 100 basis points higher by June. One would expect that prior to making such a bold forecast he would have had a conversation with the Chairman so as to not send a misleading message to the markets. With that in mind the markets took his message seriously, with the two-year note 20 basis points higher and the S&P 500 nearly 90 points lower on the day. We arrived at our desks prepared for a day of carnage on Friday morning, only to find a the Fed said that the Central Bank doesn’t favor a half point hike or an emergency move. Apparently, Bullard didn’t have the blessing of the Chairman to make such a statement?
Halyard’s Weekly Wrap – 02/04/22
/in Weekly Wrap/by halyardThe January employment report did little to quell the frazzled nerves of investors. Following the ADP employment number, which showed a contraction of -301,000 on Wednesday, the street was prepared for a negative non-farm payroll print this morning. Especially given that Labor Secretary Marty Walsh and White House Press Secretary Jen Psaki delivered warnings that the report may be a bad one due to the spike in virus cases. In fact, the BLS said the economy added 467,000 new jobs for the month, a number greater than any of the 23 economic forecasters surveyed by Bloomberg. Anyone who watches economic data long enough knows that the devil is always in the detail, and this report was no different. Apparently, looking through to the seasonal adjustment employed to “smooth” the series, the actual number would have been much closer to trend. Moreover, the BLS did their 10-year lookback adjustment in January, which further muddied the final number.