George Hosfield, CFA, discusses Ferguson Wellman's quarterly strategy titled, "Inflation's Flame Flickers," which addresses the narrow market leadership, the impact of higher interest rates on inflation and how assets are priced at this stage of the economic cycle.
George Hosfield, CFA, discusses the firm's quarterly strategy titled "Stalemate," which highlights the Fed's ongoing battle to tame inflation along with our views on the health of the banking industry and capital market expectations for the balance of the year.
Director and Chief Investment Officer George Hosfield, CFA, discusses the Fed raising interest rates, peaking inflation and our view on equities and volatility across all asset classes in our Investment Strategy titled, “Balancing Act.”
Great Britain threw investors a curve ball with its vote to exit the 28-nation European Union. Leading up to the vote, equities and commodities strengthened in anticipation of just the opposite outcome, so the reaction in asset prices after the vote was predictable —stocks and commodities fell while bonds and gold rose.
As we came into the week, markets were continuing to sell off in response to the U.K.’s vote to leave the EU. After falling 1.8 percent on Monday, the S&P 500 began to rally on Tuesday. Through today, the market was up over 3 percent this week. International stock marke
Great Britain threw financial markets a curve ball last night in voting to exit the European Union, with 52 percent of voters electing to leave the 28-nation economic block. In the days leading up to last night’s vote, equities and commodities
Stocks finished the week off by only 0.80 percent, recovering some of the losses suffered Thursday after the Fed voted to keep interest rates unchanged. Similarly, the Bank of Japan and Bank of England are also maintaining their monetary
Stocks finished the week roughly flat while flirting with all-time highs intra-week followed by selling off on low volume late in the week. More importantly, interest rates continue to test new lows. The 10-year Treasury yield fell from 1.8 percent
by Deidra Krys-Rusoff Senior Vice President
The S&P 500, Dow Jones Industrial Average and NASDAQ ended the week nearly flat from last Friday, despite a volatile trading day today. The financial sector retreated 1.4 percent, as investors’ hopes of a Federal Reserve interest rate hike dwindled on the release of today’s nonfarm payrolls report. Utilities and phone stocks rose this week, benefitting from the prospects of lower rates. The Bloomberg Commodity Index rose to a seven-month high and is nearing a level marking of a 20 percent advance from the gauge’s January bottom, close to meeting the common definition of a bull market. The dollar dropped and ended the day trading at $1.14 per euro. International markets were mixed, with European stocks slightly down and the MSCI Emerging Markets Index advancing 1.5 percent to a one-month high. The benchmark 10-year Treasury rallied, with rates falling 15 basis points over the week to yield of 1.70 percent.
What’s in a number? A lot, when the number is the nonfarm payrolls reporting significantly weaker than even the most pessimistic economist expected. May’s payroll numbers rose by a mere 38,000 versus the consensus estimate of 160,000. The report further muddied the economic waters by revising the April increase downwards to 123,000 from 160,000 and March’s numbers to 186,000 from the robustly reported 208,000 increase. The Verizon strike temporarily played into these numbers, subtracting roughly 40,000 from the overall job growth that should reverse after the strike ends. This boost, up to what would have been a gain of 78,000, is still shockingly low. The report shows that the labor market deceleration was widespread. Private-sector hiring was at 25,000 versus 130,000 in April and government hiring added a scant 13,000 jobs to the May numbers. Job losses were seen in construction, manufacturing and wholesale trade. Hiring in the paid professional and business sectors also showed slowing.
Markets initially took the news hard: The S&P 500 Index initially dropped as much as 1 percent from a recent seven month high, the dollar sold off against the euro, and bond prices increased dramatically – dropping the yield of the benchmark 10-year Treasury to 1.70 percent from 1.80. However, U.S. equities pared the early losses to around 0.2 percent as commodity producers extended gains.
The unemployment rate fell to 4.7 percent, but this is unfortunately attributed to declining labor force participation or labor force dropouts. This year’s earlier rebound in jobs participation may be stalling out. One good piece of information from the government report was that the broader U-6 unemployment rate (which reflects underemployment) remained steady at 9.7 percent. Another positive note is that average hourly earnings advanced last month by 0.2 percent, which resulted in earnings 2.5 percent higher than last year’s levels.
The weak jobs number almost certainly takes a Federal Reserve rate hike off of the table for June. The Fed governors have repeatedly stated that their policy decisions will be data-dependent and we didn’t have to wait long to hear how the Fed governors feel about the number. Federal Reserve Governor Lael Brainard spoke to the Council on Foreign Relations this morning and stated, “In this environment, prudent risk management implies there is a benefit to waiting for additional data to provide confidence that domestic activity has rebounded strongly and reassurance that near-term international events will not derail progress toward our goals.” Prior to the jobs report release, the market was pricing in one to two hikes for the remainder of the year. Now the market is placing odds of a hike below 50 percent for July, September and November.
One stand-alone jobs number does not make a trend and this could easily be a one-time blip on the radar. As noted earlier, unemployment numbers are often revised in months following releases and this extremely low number may be revised upwards in coming months. While predicting unemployment numbers is a fool’s game, we can confidently predict that everyone will be watching and waiting for the June unemployment numbers release on July 8.
Our Takeaways for the Week:
On June 23, voting citizens of the United Kingdom will vote on a referendum to leave or remain in the European Union. This possible departure has been nicknamed “Brexit”, a word that merges “Britain” and the word “exit.” The European
Ferguson Wellman is pleased to announce that Michael Garcia has joined the firm as chief technology officer. He is responsible for strategic planning and implementation of all information systems and related hardware, integration of all existing and new operation systems and management of all technology vendor relationships.
Releasing minutes from their most recent meeting indicating that a June rate hike was still very much on the table, the Federal Reserve threw a wet blanket on the equity markets this week. Pursuant to that meeting, several Fed Governors conveyed the same feeling about the strength of the
Summer is right around the corner: hot weather, barbecues, road trips … and the sweet smell of hot tar and asphalt. Yes, it’s road construction time. If it seems that there are more flaggers on the road than the last few summers, it is because transportation infrastructure spending is on the rise. Federal
Our clients regularly ask about the financial impact of elections, especially as Election Day nears. We do know that, on average, the market is up 11 percent in election years, which is akin to the long-term average return. History has shown that markets (i.e., investors) dislike uncertainty. While
When we met with clients in January of this year we highlighted our thesis that while 2015’s equity returns were anemic and there were concerns at the outset of 2016, we maintained that the equity bull market was not over. This
Julie Cooling from Forbes’ RIA Channel, meets with Mark Kralj, principal and portfolio manager. They discuss Ferguson Wellman’s investment platform and strategy as well as why we work with individual securities.
Someone once told me that the secret to a happy life is low expectations. While a melancholy motto, it aptly captures the mood of the current earnings season. The S&P 500 has rallied from the depths of January, and is now positive for the year - this despite earnings estimates dropping rather precipitously
U.S. unemployment claims at a 43-year low, manufacturing PMI’s back in positive territory, and a five percent unemployment rate are key reasons why recent recession fears have receded. Against this backdrop, stocks are above water for the year. While retail sales, including this week’s print, have been lackluster, four
f you Google the word, “fiduciary,” you will find that the definition states, “involving trust.” As a fiduciary of your investments, you should expect your investment adviser to put your interests before theirs when it comes to advice and selection of investment strategies. For many institutions, this
Today, the Bureau of Labor Statistics published its monthly employment statistics. Especially with the presidential election in full swing, the state of the jobs market is on people’s minds. Let’s step back from today’s numbers and look at the employment over this economic cycle.
What began as the worst start ever for stocks in early 2016 morphed into a market that recouped its early innings damage. As depicted in the accompanying chart, similarities between corrections observed last August and what just occurred are striking. In both cases, blue chip U.S. stocks fell by 12-13 percent because of growth scares emanating from China.
The resilience of the equity markets has been quite impressive. At the time of the February lows, pessimism was rampant. Faith in the Chinese economy was shaken, gold was on the rise and there were faint whispers of imminent recession. Fast forward six weeks and the S&P 500 has rallied
