February 26, 2020
Chief Economist Scott Brown discusses the latest market data.
In his monetary policy testimony, Chair Powell said that the Fed is a long way from achieving its inflation and employment goals. As expected, Powell downplayed concerns about higher inflation and an asset bubble. Nevertheless, long-term interest rates continued to rise, distressing stock market participants.
Personal income jumped 10.0% in January, boosted by an increase in pandemic support (checks to individuals and extended unemployment benefits) and amplified by how the numbers are reported (monthly figures at an annual rate). Consumer spending jumped 2.4%, led by an 8.4% increase in consumer durables. Spending on consumer services rose 0.7%, down 5.3% from a year ago. The PCE Price Index rose 0.3% in January (+1.5% y/y), up 0.3% ex-food & energy (+0.252% before rounding, +1.5% y/y). The core CPI rose 0.031% (+1.4% y/y).
Next week, February economic figures are likely to reflect ongoing strength. The ISM surveys should show continued growth in new orders, some pickup in employment, and input price pressures (there’s no measure of output prices, which would be useful). Friday’s job market report is expected to signal a return of job growth, following a soft patch in the last few months, but there may be some seasonal noise. The two surveys that make up the employment report should have missed the worst of the month’s poor weather. Fed Chair Powell will speak on Thursday.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.4015||1.291|
|Dollars per Euro||1.2175||1.088|
|Japanese Yen per Dollar||106.21||110.43|
|Canadian Dollars per Dollar||1.260||1.333|
|Mexican Peso per Dollar||20.853||19.281|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.72||1.06|
Treasury Yield Curve – 02/26/2021
As of close of business 02/25/2021
S&P Sector Performance (YTD) – 02/26/2021
|March 1||—||Construction Spending (January)|
|—||ISM Manufacturing Index (February)|
|March 3||—||ADP Payroll Estimate (February)|
|—||ISM Services Index (February)|
|—||Fed Beige Book|
|March 4||—||Jobless Claims (week ending February 27)|
|—||Factory Order (January)|
|—||Fed Chair Powell Speaks (“conversation on the U.S. economy”)|
|March 5||—||Employment Report (February)|
|—||Trade Balance (January)|
|March 10||—||Consumer Price Index (February)|
|March 12||—||Producer Price Index (February)|
|March 16||—||Retail Sales (February)|
|—||Industrial Production (February)|
|March 17||—||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 February 25, 2021.
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