Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
10/02/26 –
We suspected that last month’s non-farm payroll growth was too good to be true and we were partially right. The 162,000 new jobs initially reported was revised lower to 133,000. The job gains in September, which had been expected to total 90,000, were actually only 29,000. The headline unemployment rate rose from 4.1% to 4.2% but that was due to a rise in the labor force that exceeded household employment growth, both positive indicators.
Earlier this week the Bureau of Economic Analysis released the most recent revision to Q2 GDP, reporting that annualized growth was revised to 2.2% from 1.5%. Along with that, personal consumption was revised to 3.8% from 3.4%, showing that consumers continued to consume into the summer. Despite ongoing tariffs, imports exceeded exports, detracting 1.1% from growth.
Bond investors looked past the stronger Q2 growth and focused instead on the weaker than expected employment report. The entire yield curve which had spiked sharply higher on expectation of an aggressive Fed tightening cycle eased somewhat. The 2-year note touched 4.93% on Monday and is closing out the week at 4.82%. That’s still 90 basis points above Fed Funds and in keeping with fed fund futures which indicate about 90 basis points of rate hikes by next summer.
Fed speakers this week tempered the concern that the next rate hike will come at the October meeting. Specifically, Vice-Chair Jefferson said the committee may need “more time” to assess the economy. However, Fed Governor Lori Logan said that the target range should be 50 basis points higher. Our view is that the Fed doesn’t act at the October meeting and instead raises the overnight rate at the December meeting.
Next week’s economic calendar is light with ISM services index on Monday and the University of Michigan survey on Friday as the only consequential releases. On Wednesday the Fed will release the minutes of the September 16 meeting, but given the unanimous vote to raise rates, we don’t expect any surprises.
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.
Contact Us
Sitemap
Location
399 Knollwood Road
Suite 107B
White Plains, NY 10603
Halyard’s Weekly Wrap – 5/3/24
/in Weekly Wrap/by halyardInvestors began this week with much trepidation, given the mixed economic data and stubbornly high inflation that has characterized the first four months of this year. It was widely expected that Powell would offer a “mea culpa” for suggesting that rate cuts were imminent back in December. He didn’t go quite that far but did opine that the committee was “less confident” that inflation would fall to 2% in the near term. But he also cast doubt on the possibility that the next move in interest rates would be a hike.
Halyard’s Weekly Wrap – 4/26/24
/in Weekly Wrap/by halyardOn the back of strong retail sales in the last three months we were expecting that the first pass of Q1 GDP would come in above expectations. When the results were released yesterday, the tally fell well below the 2.5% consensus expectation, showing that annualized growth slowed to 1.6%. Digging through the details yielded a mixed conclusion. Personal spending, the main driver of growth, rose 2.5%, below the 3% consensus expectation, but still supportive of the view that consumers continue to spend.
Halyard’s Weekly Wrap – 4/19/24
/in Weekly Wrap/by halyardThe red-hot economic data continued this week with the release of March Retail Sales. The report showed that retail sales rose 1.1% over the previous month, more than double what was expected. February retail sales were revised to a 0.6% monthly gain from the 0.3% that was first reported. The gains were broad based and have some economists thinking that the Q1 GDP forecast may be too low. The estimate last Friday was for 2.1% growth, but the consensus thinking as of this morning is 2.5%.
Halyard’s Weekly Wrap – 4/12/24
/in Weekly Wrap/by halyardIf you’re thinking there has been a sea change in expectations this week, it’s because there has been. The March Consumer Price Index slammed the door on any hopes of a near-term rate cut with the year-over-year core CPI rising 3.8%. The CPI seems to have settled in at the 3.8% annual rate which is a level that is too high for the Fed to cut interest rates anytime soon. Reflecting that, many of the “Street” economists have withdrawn their forecast for a June rate hike and the possibility of two additional cuts this year and have now taken the safe forecast of one rate cut this year coming at the December meeting. Indeed, the Fed Fund futures have priced in a singular rate cut in the December contract.
Halyard’s Weekly Wrap – 4/5/24
/in Weekly Wrap/by halyardThe Bond market continued to reprice the yield curve this week. Driven by economic data that showed the US economy is still firm despite higher interest rates. Manufacturing and Service surveys indicated expansion – the first such reading for Manufacturing since September of 2022. On Friday, the Non-farm payroll release created a seismic move in rates as the report showed 303,000 new jobs for the month versus expectations of +214,000. The 3-month average of job gains is 276,000 – eclipsing last year’s average gain of 242,000. The unemployment rate stood firm at 3.8%.
Halyard’s Weekly Wrap – 3/29/24
/in Weekly Wrap/by halyardThough the minutes of the recent FOMC meeting reconfirmed the committee’s expectation that they’ll cut the overnight rate three times this year, market consensus is moving away from that expectation. Fed fund futures had priced in as many as five rates cut by December at the start of this year. Instead, the future now implies about 60 basis points of rate cuts by the end of this year.