Latest news with #equityMarket
Forbes
3 days ago
- Business
- Forbes
More Evidence Of A Slowing Economy – When Will The Fed React?
The incoming data says that the economy is cooling; shhh! – don't tell the equity market. The major indexes rose in the 1.3% - 2.0% range for the last week in May and were up significantly for the month with Nasdaq leading the charge advancing 9.6% (see table). This market action appears to be more related to the tariff file (on again off again) rather than to underlying economic conditions.1 Equities Markets Universal Value Advisors All the Magnificent 7 were up in the 2% - 3% range for the week. So, a very good week for equity investors. And it was a great month for all except Apple (AAPL). The average gain for the week was nearly +2.5%; and +13.5% for the month. Still, on average, on a year-to-date basis, the Magnificent 7 remain in negative territory (-4.2%). 1 Magnificent 7 Universal Value Advisors The soft data (based on surveys) have been signaling that the economy, specifically economic growth, is softening. Not quite a Recession, but could turn into one if that softening turns into contracting numbers. 23 Pending Home Sales Universal Value Advisors S&P Case-Shiller Home Price Index Universal Value Advisors Global Economic Policy Uncertainty Universal Value Advisors It is generally accepted in economic circles that when the Fed alters monetary policy it takes several months to percolate through to the general economy.3 Given the weakening soft data, some of which has already shown up in the hard date (i.e., housing, and GDP growth), the Fed should be actively moving monetary policy toward ease.3 To repeat: Because of the lag between Fed actions and the impact of those policy changes on the economy, the Fed should be acting now, when the survey (soft) data is telling it that the hard data will soon show up weaker.3 But not this FOMC or its Chair. According to Chair Powell, the FOMC is waiting for the weakness in the soft data to show up in the hard data! A good example is the rate of inflation. For some strange reason, unbeknownst to the public, the Fed (and therefore the media) choose to concentrate on the year/year CPI inflation rate. In April, that year/year CPI was +2.3% - getting close to the Fed's 2% target.3 And that appears to be where the analysis ends. Looking further, however, reveals that the three-month annualized CPI was 1.6%, below their 2% target. Now, a key CPI component is rents (35% weighting in the CPI index). But the rents used in the calculation are lagged nearly a year. If current rents were used, the three-month annualized rate computes to just +0.7%, Inflation is withering! In our view, we could actually end up with a bout of deflation over the next year or so.3 Based on this analysis, the Fed appears to be behind the curve, hung up on lagging indicators. They should be lowering aggressively now. But market odds for a rate cut in June are about 5%, and only 27% for the July meeting. Markets think that we will have to wait for the September 16-17 meeting to see the next cut (75% odds).1 From the analysis above, the Fed appears to be behind the curve! Financial markets appear to be reacting to the policy uncertainty surrounding Trump's tariffs (on again, off again…), and ignoring the incoming data which imply a slowdown in the economy.2 3 There is a significant amount of soft (anecdotal) data regarding a weakening economy, all the way from Regional Federal Reserve Bank surveys to analysis in the Wall Street Journal.2 The last few JOLTS have shown a slowing jobs market. And the U3 Unemployment Rate has had a couple of upticks. It appears that the job market is softening (rapidly) and that the Unemployment Rate (U3) will be heading higher.3 4 We've already seen Q1 GDP growth with a negative sign. Chances are that will also be the case in Q2. Retail sales have been flat and so has manufacturing output. This could mean Recession.7 The housing market is certainly in a downturn.5 If Q2 GDP growth is negative, that satisfies the two-quarter rule (i.e., a Recession occurs when GDP growth is negative for two quarters in a row).4 Will this time be different? We hope so, but won't be counting on it. Will the Fed adjust in a timely fashion? We don't know for sure, but based on past actions and recent pronouncements, odds are they will wait too long once again. We hope we are wrong!3 (Joshua Barone and Eugene Hoover contributed to this blog.)
Reuters
27-05-2025
- Business
- Reuters
Rupee slips on month-end importer dollar bids, weak equities
MUMBAI, May 27 (Reuters) - The Indian rupee weakened modestly on Tuesday, weighed down by month-end dollar demand from local companies and foreign banks, likely on behalf of custodial clients, while a fall in equities also dented sentiment. The rupee was down 0.2% at 85.27 as of 10:30 a.m. IST. India's benchmark equity indexes fell about 0.6% in early trading, tracking losses in Asian stocks with MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab slightly in the red. Importers have been covering dollar liabilities regularly as there is some concern that a modest reversal in the dollar's trajectory could push the rupee towards 86, a trader at a Mumbai-based bank said. The dollar-rupee daily fix, meanwhile, was quoting at a slight discount, the trader said, signalling heightened appetite to sell dollars at the daily reference rate published by the country's central bank. Asian currencies were mixed with the offshore Chinese yuan down 0.1% at 7.1839 while the Korean won rose 0.2%. The dollar index was a tad higher at 99.1. Persistent weakness in the dollar - to the tune of about 9% against major peers over 2025 so far - has been a tailwind for emerging market currencies across the board. Worries over U.S. trade policies and fiscal health have dented investor appetite for U.S. assets with analysts pointing out a broad pickup in hedging against dollar weakness. While the rupee has underperformed its regional peers over May, traders reckon that the currency should hold a slight upward bias in the near term. "We see USD/INR trading in the 84-86 range in the near term as markets await the India-U.S. trade deal," Kotak Mahindra Bank said in a note.
Bloomberg
16-05-2025
- Business
- Bloomberg
Monica Defend on US Dollar, Fed Cuts, Gold
Amundi Investment Institute Head Monica Defend discusses how they were surprised with the US Dollar as it correlated with the equity market. In an interview with Francine Lacqua she says she believes the fed will make three cuts this year, they're staying neutral on China, and overweight in gold. (Source: Bloomberg)
Bloomberg
07-05-2025
- Business
- Bloomberg
US Equity Market to 'Stay Exceptional,' Amundi Says
Monica Defend, Amundi Investment Institute head, discusses the situation in equity and currency markets in Europe and in the United States. "The US equity market will stay exceptional just because they have this pretty thing that is called technology, and technology will be the long-term win for the US economy and the stock market," she says. "When you go to fixed income, probably is more clear that the European market is more appetible than the US market," Defend tells Bloomberg Television. (Source: Bloomberg)
