INVESTMENT ADVISORY SERVICES: FEATURED MARKET DATA
Market Volatility Increased in March
Trade-war fears, technology company weakness, White House turnover and action by the Federal Reserve all contributed to higher market volatility in March. For the month, the S&P 500 index was lower by over 5.5% and yields on the 10-year US Treasury bond were 13 basis points lower.
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INVESTMENT ADVISORY SERVICES: FEATURED MARKET DATA
Inflation Remains Below the Fed’s Target
Some measures of inflation have risen at a faster pace in recent months, but overall, inflation remains relatively low. In a report released on March 1st, the Fed’s preferred price gauge, core personal consumption expenditures (PCE), excluding food and energy, was up 1.5% from January 2017.
INVESTMENT ADVISORY SERVICES: FEATURED MARKET DATA
Future Fed Hikes Being Priced Into Market
The Fed Funds Futures market has almost fully priced in three rate hikes by the Fed in 2018. The Treasury market is also pricing in future moves by the Federal Reserve as yields have increased considerably over the past two months.
INVESTMENT ADVISORY SERVICES: FEATURED MARKET DATA
Strong 2017 Market Returns
Equity and Fixed Income markets produced strong returns in 2017. In equity markets, the US Total Market Index rose over 21% as global economies strenthened producing even larger gains outside of the U.S.
INVESTMENT ADVISORY SERVICES: FEATURED ECONOMIC INDICATOR
Bear Flattening Trend Continues
Short-term interest rates have steadily risen in 2017 while yields on the longer 10-year U.S. Treasury bond have remained relatively flat. Growth in 2-year Treasuries reflects accelerating growth in the domestic economy and expectations of further rate hikes by the Federal Reserve.
INVESTMENT ADVISORY SERVICES: FEATURED ECONOMIC INDICATOR
Fed Watching for Inflation
Inflation and inflation expectations are central to monetary policy decisions implemented by the Federal Reserve. Despite stronger economic growth, inflation has remained low, and the Fed’s preferred measure of inflation, Core Personal Consumption Expenditures (PCE) has declined in 2017.
INVESTMENT ADVISORY SERVICES: FEATURED ECONOMIC INDICATOR
Corporate Spreads Tightening
Corporate spreads, or the difference in yields on a corporate bond and a Treasury bond with a similar maturity, have generally declined over the past year. In part, this reflects strong overall credit conditions as the default rate in the year ended in August fell to 2.9% according to Moody’s Investors Services.
INVESTMENT ADVISORY SERVICES: FEATURED ECONOMIC INDICATOR
Low Inflation Could Change Fed’s Plans
The Consumer Price Index (CPI) for July grew only 1.7% over the past year. Core CPI, which excludes food and energy costs, also grew at 1.7%.
INVESTMENT ADVISORY SERVICES: FEATURED ECONOMIC INDICATOR
Outlook Differs Between Stocks and Bonds
The stock market continues to move higher on stronger consumer and business confidence, driven in part by President Trump’s pro-growth policies. The bond market is sending the opposite message and reflects significantly less optimism about economic growth.
INVESTMENT ADVISORY SERVICES: FEATURED ECONOMIC INDICATOR
Bond Market Battles Fed
In June, Fed policymakers lifted the Fed Funds Rate to a range of 1.00-1.25% and projected one more increase this year and three more hikes in 2018. Traders in the market for fed funds futures don’t agree. They see a 57% probability that the Fed lifts rates again in 2017.
