As the calendar turned to the final quarter of 2024, there was plenty of economic and geopolitical news for investors to digest.
A Market Moving Week: Both at Home and Abroad
Labor (To)day
Labor Day marks the end of summer and is dedicated to honoring the American labor movement. The first Labor Day celebration occurred on September 5, 1882, in New York City and was organized by the Central Labor Union.
Tale of the 10-Year Treasury
A sense of excitement often marks the 4th of July as millions of Americans celebrate with a day full of festivities, reflection and national pride. This holiday kicks off July with a bang and sets the tone for a month filled with what we all enjoy – fun in the sun! Equities have taken center stage, the “bang” investors sought this year.
Unexpected Bounce: U.S. GDP Defies Gravity
Remember "2023: The Year of the Hard Landing"? That was the dreary refrain echoing through late 2022, with recession fears dominating headlines and investment strategies. Fast forward to today, and the picture couldn't be more different.
Strong Start
The final data points of 2023 are trickling in, and investors are using this information to inform their opinions on what is expected in 2024. Starting this month, we have begun to share our 2024 Investment Outlook with clients and professional partners – we look forward to having the opportunity to be together and celebrate what’s to come.
'Tis the Season for Tradition
On December 1, we gather as a firm to commemorate and pay homage to the founders of Ferguson Wellman. We reflect on those who came before us and celebrate our shared vision for the future – we cherish this tradition and look forward to it every year. Traditions like this are an integral part of the holiday season, which officially kicked off with the year’s busiest shopping weekend. The number of Black Friday and Cyber Monday commercials, promotions and emails were staggering, but did consumers take the bait?
Rates and Rates
The 10-year U.S. Treasury touched 5% earlier this week, the first time since 2007. By the end of the week, yields had settled at 4.9%, representing a significant increase from the rates of 3.7% on January 1. In the world of “bond math,” bond values fall when rates rise. Therefore, bond returns, as measured by the Bloomberg Aggregate Index, are down over 3% this year.
The Waiting Place
For almost two years now, investors have been waiting for one of the most anticipated recessions—and understandably so. After 11 rate hikes in the past 18 months, the most aggressive rate hike period in over six decades, the U.S. has defied the odds of a hard economic landing so far. When the Fed has raised rates this aggressively in the past, it’s typically been followed by a recession or “something breaking.”
Cooling of the Labor Market
As we celebrate Labor Day this weekend, we thought it appropriate to look at the current employment situation in the United States. The job market has been surprisingly robust since the elevated unemployment due to the COVID-19 pandemic and economic shutdown.
Data > Headlines
To both economists and investors, one of the biggest surprises to begin 2023 has been the resilience of the economy, and in particular the labor market. Coming off the back of the most rapid Federal Reserve tightening cycle in decades, many assumed that economic data would prove recessionary as soon as the calendar flipped. While leading indicators still point to a slowing in the economy ahead, recession still seems a ways away.
Opportunity Costs
This week, a slew of economic reports, which included inflation data, employment figures and retail sales reports, continue to indicate that the Fed still has a way to go on its quest to tame inflation.
Turning the Page
After being caught flat-footed by inflation last year, the Federal Reserve maintains a steely resolve to ensure that the beginnings of slowing inflation witnessed last fall continue in 2023. Following the stock market’s worst year since 2008 and the worst year ever for bonds, investors are hoping for better days in 2023.
No Blinking in the Tetons
The major event in the capital markets this week took place Friday morning in Jackson Hole, Wyoming. Every year, Federal Reserve Bank leadership meets for a conference to discuss current and future policy. Ahead of today’s meeting, some investors had been optimistic that Powell would soften his stance on the pace of tightening.
Paranoid
This year, investors have wrestled with several paradoxical headlines: rising inflation, a tighter Fed, possible recession, a strong labor market and a healthy consumer. Unfortunately, the paranoia caused by these reports continues as markets wrapped up the first six months of 2022 with the S&P 500 down 20%, resulting in the worst start of the year since 1970.
Back to Work
On Monday, we welcomed all employees back to our office after over two years of work-from-home. As most companies might agree, finding a balance between remote and in-office work has been a challenge. However, being at the office with the entire company has been gratifying.
The Fed Hike Begins
Last week, the Federal Reserve made headlines after raising their benchmark interest rate by 0.25%. This week, the Fed remains in the spotlight due to comments made by Chairman Jerome Powell at Monday’s National Association for Business Economics annual conference.
Climbing the "Wall of Worry"
After declining close to 6% between September 3 and October 4, the stock market is back at all time highs. Once again, it appears the market is beginning to climb the proverbial “wall of worry.”
Laboring Along
Federal Reserve Chair Jerome Powell’s speech at last month’s Jackson Hole Economic Symposium focused market participants on the labor market ‘speedometer’ that will determine how much and for how long our central bank will maintain its current stimulus measures. The Fed has set a high bar for achieving ‘substantial further progress’ towards full employment.
Last Mile Home
Led by a 3.8 percent gain in emerging markets, global equities sustained their upward march this week. The S&P 500 returned 1.4 percent and again flirts with an all-time high. 10-year U.S. Treasury yields fell seven basis points as soft inflation data weighed on expectations for future interest rate hikes. The Fed continues to grapple with conflicting signals in an attempt to balance the dual mandate of maximizing employment and stabilizing prices.
Show Me the Money
The Friday job report was slightly on the light side with December payrolls coming in at 156,000, 19,000 below economist’s estimates. Positively, the previous two months showed 19,000 in upward revisions. However, wages grew at their highest rate since June 2009, coming in at 2.9 percent year-over-year growth.