Latest news with #GregoryDaco
Yahoo
3 days ago
- Business
- Yahoo
May jobs report: Why labor supply is 'under pressure'
The labor market shows signs of softening but not retreating as tariff pressures mount. Employers added 139,000 jobs in May, topping forecasts of 126,000, while the jobless rate held at 4.2%. EY chief economist Gregory Daco and Wellington Management fixed income portfolio manager Brij Khurana join Morning Brief to break down how businesses may respond to rising costs and slowing job growth. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
CNN
3 days ago
- Business
- CNN
DOGE layoffs may have compromised the accuracy of government data
The Consumer Price Index is more than just the most widely used inflation gauge and a measurement of Americans' purchasing power. Its robust data plays a key role in the US economy's trajectory as well as monthly mortgage payments, Social Security checks, financial aid packages, business contracts, pay negotiations and curiosity salves for those who wonder what Kevin McCallister's $19.83 grocery bill in 'Home Alone' might cost today. However, this gold standard piece of economic data has become a little less precise recently: The Bureau of Labor Statistics posted a notice on Wednesday stating that it stopped collecting data in three not-so-small cities (Lincoln, Nebraska; Buffalo, New York; and Provo, Utah) and increased 'imputations' for certain items (a statistical technique that, when boiled down to very rough terms, essentially means more educated guesses). The BLS notice states that the collection reductions 'may increase the volatility of subnational or item-specific indexes' and are expected to have 'minimal impact' on the overall index. The Trump administration's drastic cutbacks of government spending and the federal workforce have economists, researchers and statisticians sounding the alarm that the reliability and accuracy of economic data could become a casualty to those efforts. 'The BLS's need to infer more data points due to personnel and funding constraints is deeply concerning,' Gregory Daco, EY-Parthenon's chief economist, told CNN. 'It raises legitimate questions about the reliability and timeliness of critical economic indicators.' While statistical agencies often have protocols to maintain data quality during short disruptions, any sustained underfunding could 'degrade the foundational data used for policymaking, market analysis and business planning,' he said. BLS officials did not respond to questions posed by CNN and instead referred to the notice and related links on response rates and collections. In the early days of President Donald Trump's second term in office, federal websites went dark and data disappeared as the newly formed Department of Government Efficiency set its sights on streamlining the government. That further heightened concerns as to whether the nation's statistical infrastructure — which already has been in a precarious state in terms of funding, response rates and public trust — was at risk of crumbling. Trump's fiscal 2026 budget proposal includes an 8% reduction to BLS funding and staffing. To what extent the CPI reductions are a sign of what's to come remains to be seen; but the immediate impacts to inflation readings could be minimal for now, Alan Detmeister, a UBS senior economist who previously helmed the Fed's Wages and Prices section, told CNN. 'Their statement said that this will have little impact on the aggregate index, which is quite possible; but up to this point, they have not put out enough information that we would need to really evaluate — we don't have any numbers on how [the reductions] are distributed, except for a few locations they stopped sampling,' he said. The reductions likely won't affect the long-run increases or decreases in inflation and, because of that, don't seem to be politically motivated, he added. 'What it does mean is that since they're using fewer observations, there's likely to be a little bit more noise in the monthly CPI data,' he said. 'How much more noise? We don't really know.' Detmeister flagged the imputations anomalies in a note to clients earlier this week, noting that the share of imputed prices jumped 15% in March (the highest level since the pandemic rattled the economy in April 2020), and then surged even more in April, by 29%. It's not yet clear whether the CPI has become less reliable, but what is certain is that any weirdness or hitches in the data is happening at a bad time, he added. 'Any time you're using fewer observations, it creates a bit of an issue; the real concern is if these types of surprises continue to occur, and the number of observations continues to be reduced,' he said. 'And if you see it occurring in other statistics as well, it just makes our view of what's going on in the economy slightly worse.' He added: 'We're really scrutinizing all the price data every month to see if there are impacts of the tariffs coming through; so, the timing isn't ideal.' The CPI for May will be released Wednesday next week.
The Hill
28-05-2025
- Business
- The Hill
Fed minutes show rising unemployment, stagflationary risks
Minutes from the May meeting of the Federal Reserve's interest rate-setting committee show stagflationary risk to the economy as a result of new White House trade policies and higher projections for unemployment through the next couple of years. Fed bankers weighed in with their outlook for the economy in the middle of Trump's tariff blitz, prior to the trade truce with China earlier this month that paused mutually imposed triple-digit tariffs. However, the decidedly cooler outlook is likely to factor into the Fed's next formal summary of economy projections (SEP) as the White House pushes ahead with numerous bilateral trade deals. Officials felt that 'the labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027.' The Fed projected in March an unemployment rate of 4.4 percent for 2025 and of 4.3 percent for 2026 and 2027. The May minutes suggest those numbers will be higher. Inflation projections were higher and growth projections lower than the ones put out in the March SEP. Inflation was expected to hit a 2.7-percent annual increase this year, and growth was forecast to be 1.7 percent. Both inflation and gross domestic product (GDP) growth have ticked downward in the latest readings from the Labor and Commerce Departments. Prices in the personal consumption expenditures (PCE) index eased to a 2.3-percent annual increase in March, down from 2.7 percent in February. They're also at 2.3 percent in the consumer price index (CPI), off a recent high of 3 percent in January. GDP fell off a cliff in the first quarter as companies pulled in imports ahead of expected tariffs. The advance estimate of first-quarter GDP showed it contracting by 0.3 percent after rising 2.4 percent in the fourth quarter of last year. The Fed's May minutes show bankers expecting diminished productivity growth as a result of White House tariff policies, which are expected to take a further bite out of GDP in the coming years. 'Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years,' they say. The Fed has maintained a pause on interest rate cuts amid policy uncertainties. The Fed delivered three rate cuts in the back half of last year before halting them in January and leaving them at a range of 4.25 to 4.5 percent since then. Commentators noted in the minutes that officials thought inflationary pressures could ease if employment conditions weaken enough. 'Some [officials] noted that heightened uncertainty could curb demand, and that inflation pressures may ease if downside risks to activity, or the labor market materialize,' EY economist Gregory Daco wrote in a commentary.
Yahoo
21-05-2025
- Business
- Yahoo
Defined Outcome ETFs for Downside Protection
After a steep sell-off triggered by President Trump's April 2 tariff announcement, U.S. equity markets have staged an impressive comeback. The S&P 500 has added $9 trillion in market value in just over a month, rising almost 20% from April lows. However, there are doubts about how much markets could rise further without concrete trade agreements, despite the recent 90-day tariff pause and the announced breakthroughs with China and the UK (read: S&P 500 Makes the Fastest Recovery Since 1982: 5 Best ETFs).In this backdrop, investors should consider innovative investment vehicles that strike a balance between growth and protection. One such solution gaining traction is Defined Outcome ETFs. These ETFs are designed to provide investors with a level of downside protection while allowing them to participate in upside market returns, making them a compelling addition to a diversified portfolio. There are several defined outcome ETFs, each with specific outcome periods and buffer we highlight some prominent ETFs that offer downside protection to the major indices. These are FT Vest Laddered Buffer ETF BUFR, Innovator Defined Wealth Shield ETF BALT, FT Vest Laddered Nasdaq Buffer ETF BUFQ, Innovator Laddered Allocation Power Buffer ETF BUFF and iShares Large Cap Deep Buffer ETF IVVB. Some Wall Street analysts are issuing warnings that the rally may be overextended, driven more by sentiment than fundamentals, particularly as tariff risks persist. Though a temporary 90-day pause on U.S.-China tariffs recently reduced the effective tariff rate from 25% to 14%, EY Chief Economist Gregory Daco warns that the effective U.S. tariff rate remains near its highest level since JP Morgan, risks such as tariff uncertainty, softening economic data and fiscal headwinds challenge the sustainability of the recent equity rebound. The analyst warned that markets are showing an "extraordinary amount of complacency" after rebounding from their 'Liberation Day' losses. JP Morgan flagged stagflation — a mix of slowing growth and resurgent inflation — as a persistent sentiment was further dampened by a recent Moody's downgrade of the U.S. credit rating. This has raised questions about the longevity of the current market rally and the potential for increased volatility in the coming months (read: Moody's Downgrades U.S. Rating: What's Next for S&P 500 ETFs?). Defined Outcome ETFs, also known as buffer ETFs or structured outcome ETFs, use options-based strategies to create a predefined range of potential returns over a set investment period, typically one year. These ETFs aim to cap the maximum return an investor can achieve, buffer a specific percentage of losses, usually 10%, 15%, or 20%, and provide transparent outcomes at the start of the investment strategy enables investors to understand the risk/reward trade-off before committing capital, which is particularly valuable during periods of high market uncertainty (read: Buffer ETFs Attract Billions as Investors Seek Shelter from Market Turmoil).Defined Outcome ETFs utilize option contracts such as buy protective puts (these limit losses if the index falls), sell covered calls or call spreads (these generate income but also cap potential gains), or sell puts below the buffer (to help finance the strategy) to structure their payoff profiles. FT Vest Laddered Buffer ETF (BUFR) FT Vest Laddered Buffer ETF seeks to provide investors with U.S. large-cap equity market exposure while limiting downside risk through a laddered portfolio of 12 FT Vest U.S. Equity Buffer ETFs, or underlying ETFs. These underlying ETFs seek to provide investors with returns that match the price return of the SPDR S&P 500 ETF Trust (SPY), up to a predetermined upside cap, while providing a buffer against the first 10% of SPY losses. BUFR is the most popular option with AUM of $6.6 Defined Wealth Shield ETF (BALT)The Innovator Defined Wealth Shield ETF seeks to track the return of SPY to a cap and provide a measure of downside protection by seeking to buffer investors against losses. The ETF targets a 20% buffer every 3-month outcome period. BALT has AUM of $1.4 billion and charges 69 bps in annual Vest Laddered Nasdaq Buffer ETF (BUFQ)FT Vest Laddered Nasdaq Buffer ETF offers investors with large-cap equity market exposure while attempting to limit downside risk through a laddered portfolio of four FT Vest Nasdaq-100 Buffer ETFs or underlying ETFs. The underlying ETFs seek to provide investors with returns that match the price return of the Invesco QQQ Trust (QQQ), up to a predetermined upside cap, while providing a buffer against the first 10% of QQQ losses, over a defined one-year period. BUFQ has amassed $936.3 million in its asset base while charging 100 bps in annual Laddered Allocation Power Buffer ETF (BUFF)Innovator Laddered Allocation Power Buffer ETF seeks to provide exposure to the FTSE Laddered Power Buffer Strategy Index. The Index comprises an equal-weight allocation to each of the 12 Innovator U.S. Equity Power Buffer ETFs, which provide the upside of U.S. equities, subject to caps, while buffering against the first 15% of U.S. equity losses. BUFF has gathered $606.2 million in its asset base while charging 89 bps in annual fees. iShares Large Cap Deep Buffer ETF (IVVB)iShares Large Cap Deep Buffer ETF seeks to track the return of the iShares Core S&P 500 ETF (IVV) up to an approximate upside limit, while seeking to provide downside protection against approximately 5-20% of IVV's losses over each calendar quarter. IVVB has AUM of $259.9 million and charges 50 bps in annual fees. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
21-05-2025
- Business
- Yahoo
What Wall Street is seeing as market rally begins to stall out
US stock futures (ES=F, NQ=F, YM=F) pull back in Wednesday pre-market trading while bond yields (^TYX, ^TNX, ^FVX) continue to rise as the market rally seems to be stalling. Yahoo Finance senior markets reporter Josh Schafer comes on The Morning Brief to share his snapshot of the US stock market (^DJI, ^IXIC, ^GSPC), citing EY chief economist Gregory Daco's note that equities have "reacted with unwarranted optimism, overlooking the persistent economic drag posed by elevated tariffs." To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
