February 12, 2020
Chief Economist Scott Brown discusses the latest market data.
The Consumer Price Index rose 0.3% in January (+1.4% y/y), led by a 7.4% rise in gasoline prices (-8.6% y/y). Food prices edged up 0.1% (+3.8% y/y). Ex-food and energy, the CPI was unchanged (+0.031% before rounding, up 1.4% y/y). Homeowners’ equivalent rent (24% of the overall CPI and 30% of the core CPI) rose 0.1% in each of the last three months, up 2.0% over the last 12 months, vs. +3.3% in the 12 months ending January 2020.
In his speech to the Economic Club of New York, Fed Chair Powell noted that the reported unemployment rate (6.3%) understates the weakness in the labor market (the real rate should be closer to 10% according to Powell). He stressed the importance of “a patiently accommodative monetary policy stance” in achieving full employment and downplayed the risk of substantially higher inflation.
Based on current law (that is, no further fiscal support), the nonpartisan Congressional Budget Office projects a deficit of $2.26 trillion (10.3% of GDP) this year, dropping back to $905 billion (3.6% of GDP) in FY24. Interest payments over the next 10 years remain low relative to GDP (much less than in the 1980s).
Next week, the January economic reports will be subject to seasonal adjustment noise. Retail sales may see a seasonally adjusted gain, as the unadjusted January drop ought to be lower following a weak holiday shopping season.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.3816||1.296|
|Dollars per Euro||1.213||1.087|
|Japanese Yen per Dollar||104.75||110.09|
|Canadian Dollars per Dollar||1.271||1.325|
|Mexican Peso per Dollar||19.964||18.621|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.05||1.18|
Treasury Yield Curve – 02/12/2021
As of close of business 02/11/2021
S&P Sector Performance (YTD) – 02/12/2021
|February 15||—||Presidents Day Holiday (markets closed)|
|February 16||—||Mardi Gras, Shrove Tuesday|
|February 17||—||Producer Price Index (January)|
|—||Retail Sales (January)|
|—||Industrial Production (January)|
|—||Homebuilder Sentiment (February)|
|—||FOMC Minutes (January 26-27)|
|February 18||—||Jobless Claims (week ending February 12)|
|—||Building Permits, Housing Starts (January)|
|Febrary 19||—||Existing Home Sales (January)|
|February 23||—||State of the Union Address|
|March 5||—||Employment Report (February)|
|March 16||—||FOMC Policy Decision|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business January 28, 2021.
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