Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
12/05/25 – Will the FOMC deliver the Santa Claus Rally?
A combination of recent and stale economic data continued to trickle out this week, painting a mostly status quo state of the economy.
The November ISM manufacturing survey came in at 48.2, below the 49.0 expectation and below the 50 breakeven, indicating a slowing in manufacturing, while the ADP employment change showed a 32,000 contraction in jobs: a warning that the employment picture may still be deteriorating. Contradicting that were the initial claims and the continuing claims for unemployment insurance, both of which narrowed last week. The jobs report, which is released on the first Friday of every month, is postponed until December 16th. However, the most recent University of Michigan surveys that were released at 10:00 a.m. this morning were mixed. Current conditions ticked lower while expectations rose to 55.0, an encouraging sign. Also encouraging are the 1-year inflation expectations, which fell from 4.5% to 4.1%. Maybe it’s the holiday season that’s improved the mood of the surveyed – or perhaps the end of the government shutdown and a rebound in equity valuations.
With that limited insight into the current state of the economy the Open Market Committee will meet next week to determine whether to again cut the overnight interest rate or leave monetary policy unchanged. We’re split as to what they will do. On the one hand, anecdotally, it feels as though the jobs market has softened, despite initial claims. On the other hand, quantitative tightening ended on December 1st, and with changes in SALT, tax policy should be somewhat stimulative early next year. Further complicating the decision is that it looks like there could be four dissenters voting to keep the rate unchanged. That’s going to send a mixed message to the market.
With that said, the market is sending a clear message that another 25-basis point cut is coming. The three-month T-Bill plunged from 3.84% last Friday to 3.66% today. Long bond investors weren’t as enthusiastic at the prospect of easier money, with the 30-year 13 basis points higher in yield. Equity investors, along with the 2-year note buyers, are optimistic about the prospect of another rate cut with the S&P 500 less than 1% away from a new all-time high.
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 – 09/03/21
/in Weekly Wrap/by halyardThe Bureau of Labor Statistics reported that the U.S. economy only added 235,000 new jobs is August. That was well below the anticipated 733,000 that was the consensus expectation. The immediate question is that number weak enough to convince the FOMC to postpone the tapering of open market purchases. Given the verbal jousting of the various Fed Presidents and Governors over the last few weeks, we conclude that the answer is a solid Maybe.
Halyard’s Weekly Wrap – 08/27/21
/in Weekly Wrap/by halyardPowell turned ever so mildly dovish in his comments to the virtual Jackson Hole Central Bank meeting on Friday. Despite a cadre of Central Bankers calling for an immediate halt to the open market purchases, the Chairman said the Open Market Committee is likely to commence tapering before the end of 2021. We believe the street had set up for more hawkish language, with some looking for an announcement that taper would begin in September. That was a foolish call! While the Fed doesn’t always look to the calendar in making policy announcements, the Chairman had to realize that doing so on the last Friday of August would rock the market. Instead Treasuries traded sideways which was enough to drive the S&P 500 to another record high.