Halyard’s Weekly Wrap
our thoughts on the past week’s market activity, economic releases, and Federal Reserve commentary
07/31/26 –
At the post-FOMC press conference Kevin Warsh surprised investors with his lack of commitment, either hawkish or dovish, in his comments to reporters. Since assuming the role as chairman two months ago, his comments have been decidedly hawkish. In an unofficial survey prior to the meeting about 20% of those surveyed were expecting a surprise rate hike. Warsh has mentioned on numerous occasions that inflation was running too hot for his liking. Despite those public comments there were only 3 members of the committee that voted for a rate hike.
In his press conference he made several contradicting statements that left everyone a bit confused. Specifically, when asked if the recent rise interest rates was an indicator that the Fed should raise the overnight rate, he “waffled” and suggested that it was in response to better than expected economic news of late. When asked about the next move in rates he completely demurred, which left the questioners, and us, a bit baffled. He has explicitly said that he intends to use the overnight rate as the primary policy tool, but if he’s of the opinion that inflation is too high, then the overnight rate is too low.
Bond investors initially cheered with the 2-year note rallying to close the day at 4.27% after touching 4.32% earlier in the morning. The market is giving some of that back, with the 2-year/30-year yield curve closing the week at 99 basis points, 10 bps wider than where it was earlier in the week.
With so much focus on the Fed, the headline advance GDP report was largely ignored. The Bureau of Economic Analysis estimates that Q2 GDP grew at a l.5% annualized rate, materially below the 2.0% expectation. However a closer look at the underlying details softens the headline number. Private domestic final purchases (PDFP), the cleanest look at how much Americans are buying, rose to 3.9% over the first quarter. The difference between the total GDP and the PDFP was mainly attributable to the widening trade deficit and inventory destocking detracting from growth.
Released along with GDP was the inflation component of the report. That showed that core PCE price index rose 3.4% annualized, down from 4.4% recorded in Q1, but still above the 2% target quoted by the FOMC.
Next week brings the employment report for July. The consensus is expecting the BLS to show that 86,000 new jobs were added in the month, better than the 57,000 added in June but slightly below the 3-month average of 98,600.
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 – 8/25/23
/in Weekly Wrap/by halyardFormer St. Louis Bank fed president James Bullard attempted to steal the thunder from the Fed’s feel good summer meeting in Jackson Hole with his Thursday missive of accelerating growth and the need for the Fed to continue with rate increases. We asked Mr. Bullard to point to the 5 most recent economic indicators that are accelerating – He didn’t respond to Halyard’s questions.
Following last week’s retail sales beat, the only indicators to surprise to the upside were new home sales and jobless claims. Halyard would describe the economic data as “fair to middling”.
Existing home sales, which are 5x more than new home sales, fell again and are 7.2% lower year to date. Durable goods and PMI surveys both underwhelmed.
Halyard’s Weekly Wrap – 8/18/23
/in Weekly Wrap/by halyardRetail Sales for July rose 1.0% over the previous month, much higher than the 0.4% that was expected, although pundits attributed the upside surprise to the Amazon Prime day which was hosted mid-month. The worry is that those sales pulled forward future sales and there will be a giveback in August and September. Looking back on the Prime Day effect on monthly retail sales shows no pattern of an uptick in the month of the sale and no pattern of a drop off in sales in the following month so we caution against assuming retail sales will drop in September and/or August.
Halyard’s Weekly Wrap – 8/11/23
/in Weekly Wrap/by halyardAs we close out the second week of August, the summer doldrums have set-in on the capital markets. This week was mostly devoid of breaking economic data, save for the inflation indices released yesterday and this morning. CPI was mixed, with the year-over-year measure ticking up to 3.2% from the 3.0% logged last month, but on the month-over-month core inflation registered 0.2% for the second consecutive month, the smallest back-to-back gain in more than two years. The Producer Price Index showed similarly subdued results, drawing a collective “Ho Hum” from traders happy to let August drift by with limited volatility.
Halyard’s Weekly Wrap – 8/4/23
/in Weekly Wrap/by halyardThe July employment report showed that the economy generated 187,000 jobs in the period versus consensus expectation of 200,000 while recording a downward revision to the two prior months totaling 49,000. Wage growth as shown by average hourly earnings remained solid for the month – indicating that the slowdown in hiring is a reflection of a tight labor supply. Two Fed officials spoke post the non-farm payroll report and both indicated that the path of employment and inflation were heading in the right direction and that dialogue may shift from whether to raise rates to how long do rates need to remain at the current level. Bond prices rose in a relief rally, removing the past week’s rise in the yields in 2yr and 5 yr Notes.
Halyard’s Weekly Wrap – 7/28/23
/in Weekly Wrap/by halyardThe highlight of the trading week was not Wednesday’s FOMC rate decision, but the slew of economic data released on Thursday. The data was unambiguously strong, and more in line with an accelerating economy than one that is slowing. Gross domestic product (GDP) was expected to slow to 1.8% annualized from the 2.0% recorded in the first quarter. Instead, it grew 2.4%, driven higher by continued resilient consumer spending and strong business spending. The price index component of the report grew at an annualized rate of 2.2%, down from 4.1% recorded in the prior quarter.
Halyard’s Weekly Wrap – 7/21/23
/in Weekly Wrap/by halyardThe economic data this week was decidedly mixed, casting some doubt on the Fed’s likelihood to raise the overnight rate at the upcoming FOMC meeting. The June Retail Sales report came in at 0.2% month-over-month, well below the 0.5% expectation. But that number was pulled lower by a dip in gasoline prices and building materials. Looking past the headline to what the BLS calls the control group, the section more attuned to the consumers propensity to spend, the report told an entirely different story. For the month the control group spending increased 0.6%, led by online shopping. Moreover, the May retail sales results were revised higher from 0.3% to 0.5%, fortifying Chairman Powell’s message that monetary policy is not tight enough.