Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
04/10/26 – Return to Normalcy?
Markets are returning to a state of normalcy after the extreme volatility that the war with Iran prompted. The two-year note is closing the week at 3.79%, well below the 3.99% touched late last month, while the long bond is marginally lower at 4.91%. Equities have also rebounded sharply with the S&P 500 about 2.5% below the all-time high. Similarly, the U.S. dollar has resumed the weakening trend versus the Euro and the British Pound. While the return to normalcy is welcome, it comes without a definite resolution to the conflict or even a modicum of certainty. While the missiles have ceased, the Strait of Hormuz remains closed hindering global trade and the cost of oil remains close to $100/ barrel.
While economic data has largely fallen off the radar in terms of driving the direction of trading, most of what was released this week reflected economic strength. Durable goods ex-transportation registered a better-than-expected monthly gain of 0.8%, personal spending rose 0.4% over the prior month, and initial claims for unemployment insurance remained tame. This morning the BLS’s release of consumer prices showed that the overall monthly change was an elevated 0.9%, as expected, but the core price year-over-year inflation rose a more moderate 2.6%.
The unseasonable cold weather in the Northeast and the war with Iran, has been a distraction from the calendar, but earnings season kicks off on Monday with Goldman Sachs reporting. Also reporting next week are J.P.Morgan, Wells Fargo, and Citigroup, among others. We’ll be watching for clues as to how the relatively harsh winter impacted earnings.
In addition to earnings, the BLS is scheduled to release the Producer Price Index for March. The expectation is the core measure will rise 4.6% over last year, up from 3.9% last month.
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
Location
399 Knollwood Road
Suite 107B
White Plains, NY 10603
Halyard’s Weekly Wrap – 3/22/24
/in Weekly Wrap/by halyardAs expected, the FOMC left the Fed Funds corridor unchanged on Wednesday. Mildly surprising to us though, their economic forecast continues to indicate that they expect to cut the overnight rate three times this year. As we’ve written on numerous occasions, the job market remains robust, and the consumer price index has stabilized at the mid-3% level, well above the Fed’s stated target. The question being asked, is there an imminent threat to economic growth that the Fed is aware of, but the rest of the investing community is not? Especially since a popular financial conditions indicator, which aggregates broad financial conditions such as interest rates, equity prices, and credit spread is showing that financial conditions have eased since last fall. Why then is the Fed threatening to ease policy?
Halyard’s Weekly Wrap – 3/15/24
/in Weekly Wrap/by halyardThe bullish tone on which the bond market closed last week has completely reversed and is closing this week with a decidedly bearish resolve. The hope had been that the inflation measures this week would show further progress toward the Fed’s 2% target. That didn’t happen. Instead, the Consumer and Producer price indices both moved higher on a month-over-month basis in February. The core CPI index was 0.4% higher than the January measure, rounding to roughly 5.0%, a far cry from the Fed’s target.
Halyard’s Weekly Wrap – 3/8/24
/in Weekly Wrap/by halyardAt first glance the employment report for February was surprisingly strong. The expectation was that the economy would add 200,000 new jobs, up from an expected 188,00 last week. The actual change in payroll was 275,000. The year-over-year change in average hourly earnings was 4.3%, 0.1% lower than it registered last month but still an impressive uptick.
Halyard’s Weekly Wrap – 3/1/24
/in Weekly Wrap/by halyardThis week proved disappointing in that each day was jammed with economic data and a parade of Fed speakers and the market barely budged. After last week’s range-bound trading we felt certain that interest rates would break out of their recent band. The best that traders could manage was a rally in the 2-year note taking the yield-to-maturity of that issue down to 4.53%, the lowest yield in nearly three weeks.
Halyard’s Weekly Wrap – 2/23/24
/in Weekly Wrap/by halyardThis was a quiet week for the fixed income market, with the entire yield curve closing within a few basis points of last Friday’s close. The only real action came between late Wednesday afternoon into today’s close, as investors digested the minutes of the January FOMC meeting. As expected, the minutes echoed Chairman Powell’s post-meeting press conference comments that communicated that a rate cut was not imminent. That was enough to push the long bond up to 4.48%, the highest yield so far this year. Contributing to the rise was initial claims for unemployment insurance which totaled 201,000 for the week. That was the second lowest tally of 2024 and further evidence that the economy is not poised to enter a recession. But that wasn’t enough to offset dip-buying on Friday. On the week, the 30-year bond closed six basis-points lower, finishing at 4.37%.
Halyard’s Weekly Wrap – 2/16/24
/in Weekly Wrap/by halyardIn last week’s wrap we cautioned that despite the core PCE deflator touching the Fed’s target, there was a risk that the CPI wouldn’t show the same improvement. Economists had forecasted that the consumer inflation measure would rise to 3.9% year-over-year. That’s exactly where it was reported, and the month-over-month core registered 0.4%. Despite matching the forecast, traders seemingly weren’t prepared for that result because yields across the curve skyrocketed. Obviously, the report took the possibility of an early Fed rate cut off the table. Fed fund futures are now indicating that the first cut has been pushed off to this summer. The 2-year note, which had traded as low as 4.14% last month, shot up to 4.65% on the news, before closing the week half of a basis point higher at 4.655%. The inflation news also took the “wind out of the sails” of the equity market, with the S&P 500 plunging 68 points by the close of business on Tuesday. That entire move has been erased though, with the index closing roughly unchanged for the week.