Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
09/04/26 – The yield to maturity on 2-year US Treasury Notes is 100bps higher since February 28th, – the day the US and Israel escalated the Iran conflict.
The non-farm payroll total for August was a bit of a shocker, with the economy adding 162,000 new jobs versus the expectation for 55,000. That result exceeded even the most optimistic forecast of 125,000 put forth by a private economic forecasting firm.
In addition, the 23,000 lost jobs that were originally reported last month was revised to a gain of 21,000. The unemployment rate remained unchanged at 4.1%, the lowest it’s been in nearly a year.
Economists caution that the August employment report can be tricky due to impact of local educational employment returning and the staggering of the first day of school for regions across the country. Nevertheless, it’s an undeniable bright spot in an economy that has been grinding along despite the negative headlines of the prolonged war with Iran and persistent inflation.
Other economic data released this week showed the economy continues to grow at a moderate pace with the Job Openings report stable, durable goods sales continuing to grow and the initial claims for unemployment insurance holding steady at the low end of the range.
Given Chairman Warsh’s hawkish comments at last week’s Jackson Hole symposium, this morning’s release makes a September rate hike all but a certainty. The consumer price index, to be released next Friday, could offer some relief as the core year-over-year inflation is expected to fall to 2.4% from the 2.5% recorded in the previous month. But we don’t think that outcome is compelling enough to keep the committee from raising the overnight rate.
In anticipation of the hike, the two-year note is closing just below the 4.40% high set on September 1st. On the other hand, the equity market seems to be sanguine to the idea of a 25-basis point rate hike. For the week, the S&P 500 is nearly unchanged and less than 1.5% below the all-time high set last month.
The pre-FOMC communications blackout period starts tomorrow so any discussion of what the committee may do will be unofficial.
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.