Awaiting the Fed. The Federal Reserve (Fed) concludes its two-day policy meeting this afternoon. Though no rate hike is expected, investors will look to the policymakers’ interest rate forecasts, known as the “dot plots,” along with comments from Fed Chair Jerome Powell in his post-meeting press conference about the central bank’s plans to wind down its balance sheet.More specifically, the targeted composition of the balance sheet. Prior to the financial crisis, the average maturity of the Fed’s Treasury holdings was less than four years, compared to roughly nine years currently. Reducing the average maturity closer to post-crisis levels would effectively reduce stimulus, but it may also better position the Fed to react to the next downturn. For more insights on the Fed see our recently published Market Signals podcast and yesterday’s blog post: The Fed’s High Hurdle.
U.S.-China deal weeks away, hopefully. In a conversation with President Trump last week, Trade Representative Lighthizer reportedly said he expects a deal can be reached in “two or three weeks.” However, high hurdles remain, including how to ensure China makes good on its promises to make it easier for U.S. firms to do business in the country. More recently, China is considering excluding a commitment to buy Boeing 737 Max jets, potentially making it harder to reduce its trade surplus with the U.S.
Durable goods shipments decline, new orders continue to rise. U.S. Census Bureau data released yesterday showed that durable goods shipments, which feeds into gross domestic product (GDP), was down for a fourth consecutive month on a drop in transportation equipment. However, new orders for manufactured goods rose for a second straight month in January, while orders for manufactured durable goods rose for a third straight month, both of which bode well for future economic activity in the manufacturing sector.
New highs and bear markets. The S&P 500 Index had a big reversal off its highs yesterday, but it is still more than 20% above the December 24 lows. In fact, it is less than 4% away from a new all-time high, something very few of us would have expected this time three months ago. Here’s the catch, looking at all the bear markets over the past 60 years shows that when the economy isn’t in a recession, stocks tend to have recovered bear market losses and move above the previous peak in about six months compared to 18 months when the economy is in a recession. So maybe this big move back and potential new highs shouldn’t be a surprise? We discuss this interesting development in today’s LPL Research blog.
- Federal Reserve Rate Decision (Mar)
- Germany PPI Report (Feb)
- Japan Leading Index (Jan)
- Japan Coincident Index (Jan)
- Philadelphia Fed Business Outlook (Mar)
- Initial Jobless Claims (Mar 16)
- Leading Index (MoM Feb)
- Eurozone Consumer Confidence (Mar)
- Japan CPI Report (Feb)
- Nikkei Japan Manufacturing PMI (Preliminary, Mar)
- Markit US Manufacturing PMI (Preliminary Mar)
- Markit US Services PMI (Preliminary Mar)
- Markit US Composite PMI (Preliminary Mar)
- Exisiting Home Sales (MoM Feb)
- Markit/BME Germany Manufacturing PMI (Preliminary Mar)
- Markit Eurozone Manufacturing PMI (Preliminary Mar)
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Index data obtained via FactSet
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