Last Economic Update for 2016

For my last economic update of the year I will review where we are today and try to read the tea-leaves of the incoming Trump administration.  The president elect is lucky in inheriting a solidly growing economy.  His penchant for decisive action may run into procedural roadblocks in Washington which could significantly delay actions which require congressional approval.  Overall I see few significant effects in the coming months.

 Our latest reading for the Astor Economic Index® (“AEI”) improved over the month and currently shows the US economy as growing somewhat above average.  I also see modest improvement year over year.  As this is the last update of 2016 I can say that I am pleased with the performance of our index as an economic gauge over the last 12 months.   Memories may be dusty, but a year ago there was widespread concern about US economic weakness.  The AEI was showing only minor declines at the time and, in fact, no extended decline in the boarder economy occurred.  The AEI is a proprietary index that evaluates selected employment and output trends in an effort to gauge the current pace of US economic growth. 

usei-long

 The new president’s first element of luck is an economy running at full employment.  Last Friday’s employment report was fairly strong – showing the economy continues to add jobs faster than the number of new entrants to the work force.  Levels of both unemployment and underemployment (ie, involuntary part time work) have both dropped significantly in recent months. Recently we have seen a trend of improving wages.  That trend weakened slightly this month but the year on year improvement is still significant.

 The nowcasts produced by the Federal Reserve banks of Atlanta and New York are both still showing strong growth in the fourth quarter.  The Atlanta Fed is currently estimating 2.6%  SAAR and the New York Fed is currently forecasting 2.7%.  Both somewhat above the average for the current expansion. Both estimates have been updated since the release of the employment number for November.

 There is another element of luck in the external environment – what is going on with our trading partners around the world.  I attribute the last few years tepid industrial production growth to weak external demand and the strength of the dollar. 

ip-yoy

The chart below is the GDP weighted average of the individual purchasing managers indexes. I intend it to be proxy for the change in demand in the world manufacturing cycle. 

world-pmis-2016-12-06

This reading is now approaching its highs from 2014 – suggesting that the weak global manufacturing environment may be improving.  Mitigating this global good news somewhat is the performance of the dollar which has set new highs in trade weighted terms.  This makes it harder for business to export, though dollar is not seeing the sharp rise it experienced in June 2014- December 2016 period.

 The contours of economic policy under the Trump administration have yet to be fully fleshed out.  One interpretation of the market action since the election is that there is a substantial likelihood of fiscal stimulus in the form of tax cuts and perhaps infrastructure spending.  The President will need to negotiate with both the House and the Senate which have different priorities than does the President Elect.  Additionally the GOP holds only slim majorities in both houses, increasing the chance for a small number of legislators to derail the process – at least temporally.   If the normal timetable holds we will not see a budget from the new administration until February and House and Senate budgets until March.  The negotiation process will then begin.  This gives plenty of time for the markets to be disappointed by what may turn out to be an unusually public negotiating style.   

 The morning after the election I noted that the president has much more autonomy in trade policy.  I feel that my comments are still germane: unlike in fiscal policy, the President is able take unilateral actions which may sound like the first shots in a trade war.  Combine fiscal policy with trade policy and era of Government By Tweet may offer plenty of examples of what my bond trader father used to call Tape Bombs.  These are shocks in the form of unexpected, inherently unpredictable pieces of news which the market reacts and over-reacts too.  Recall the summer and fall of the debt ceiling to get a sense of what I mean. 

 At Astor we think that in times like these is even more important to approach the markets with a discipline which clarifies decision making by keeping the focus on facts not predictions.  In our case we will continue to use the state of the of the business cycle as it unfolds as our key input in making investment decisions.

 Closing with the fed, my judgement and that of the fed funds futures market (which has a conventional interpretation, see this CME page for example) is that the FOMC will raise rates at the next meeting.  The using the same interpretation of the fed fund futures curve shows that the market expecting another hike or two by next year, though the market has been repeatedly disappointed in the last several years.  Two things which could make the fed hike more quickly than the market expects would be a sustained rise in core inflation or the prospect of substantial fiscal stimulus.  Keep on the lookout for comments by fed governors making the connection between the monetary and fiscal stances of the US.

Overall the economy continues its recent path of modest growth.  With some headwinds dissipating we may be hope that next year will be on the upper end of the recent range of growth.  As always we will continue to monitor the economy closely.

All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

 The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.

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Analysis: The 2016 Presidential Election

In light of Donald Trump’s win and the GOP hold of all three branches of government, the question on most minds today is, what is the outlook for the US economy? My short answer is that it is too early to tell. At Astor, our philosophy is to be guided by actual economic data rather than forecasts. Nevertheless, it is important to think about possible implications for the U.S. economy.

The economy came into the election on an extremely stable path. Our Astor Economic Index®– a proprietary index that evaluates selected employment and output trends in an effort to gauge the current pace of US economic growth–has been steadily showing modest, but positive, growth all year. Indeed, it has been in an unusually narrow range recently suggesting to us that fundamental dynamics of the US economy are stable.

In the next days to weeks the heightened uncertainty caused by both the unexpected outcome and the unknown policies of a Trump presidency seem likely and the stock market tends to dislike uncertainty.

The nontraditional nature of Trump’s campaign means that there are few coherent, detailed policy commitments to game out. Trump has held a variety of opinions on most matters and will have to work with Congress, which may feel emboldened by his political inexperience.

Discontent over the US trade position has been Trump’s consistent theme. Much trade power has been focused in the executive branch, leaving the new President some leeway to act without Congress, subject to court review over an extended period of time. Given what Trump has said about his negotiating style, it would not be surprising to certainly see some eye-catching headlines about withdrawing from NAFTA. Trump has repeatedly called for a 35% tariff on Mexico and 45% on China, which he may be able to impose at least for a few years unilaterally.  This will reduce trade broadly and disrupt international supply chains.

For more on Trump’s views on trade see this article from the Peterson Institute. The authors point out that using standard economic models, a full trade war (where the US raises tariffs on other countries that can then retaliate in kind) could on its own cause GDP growth to be as much as 2.9 percent lower per year for several years. his same paper estimates that an aborted trade war, which they operationalize by saying tariffs are imposed only for year before reverting to previous levels, could have a small stimulative effect on the economy. The future may be somewhere in between.

In my opinion, the reality of substantively reduced trade would likely also be a weaker dollar and higher inflation in the medium term in addition to lower GDP growth. It seems that the broader multilateral free trade deals such as the Trans Pacific Partnership will not be brought to Congress.

Early on it is possible that repudiation of as much of the Obama legacy as possible could be the GOP first order of business. As observers have noted, that may mean repealing Obamacare and reducing financial regulation such as Dodd-Frank and the Consumer Financial Protection bureau.

One thing all Republicans agree on is tax cuts—and that, in our view, could be the single most likely outcome. Both Trump’s and speaker Ryan’s plans skew cuts toward the wealthy. Trump agreed with his opponent that increased infrastructure spending is necessary, but that may prove harder to get through Congress. It is not clear if Congress will make substantive spending cuts to pay for the increased fiscal spending.  This has the potential of being stimulating to the economy, but if unfunded could cause bond yields to move higher quickly.

Turning to the Fed, where is its promise to raise rates in December?  Much will depend on the reaction of markets between now and the next FOMC meeting in a month. Should markets recover and treasury prices stabilize the Fed may still raise rates a quarter point in December. Should the new administration’s plans crystalize to substantial fiscal spending the FOMC may see the need to raise rates preemptively.

Janet Yellen’s term as Chair of the FOMC expires January 2018. Trump has both praised and condemned Yellen this year, but it seems likely in our view that he would prefer  to install someone new as chair.  In addition, there are currently two open seats on the board of governors giving the new administration a chance to move the Fed. My sense is that the rest of the GOP would prefer a more hawkish Fed and without a strong campaign promise to fulfill Trump may accede to their wishes.

Overall, I expect no large changes in unemployment or output over the next few months as a result of the election, but the increased uncertainty may lead to a challenging time for all assets until some clear signals emerge from the new administration.  As always we will wait to see changes showing up in the economic numbers before adjusting client portfolios and will use our time-tested process to guide us whatever occurs.

 

All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

 The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product.

 

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Passive Investing Grows in Popularity—But No Panacea

As the investing public, from institutions to individuals, moves away from stock picking and other traditionally active strategies, the beneficiary is passive investing.

As the Wall Street Journal reported recently, pension funds, endowments, 401(k) retirement plans, and retail investors are opting increasingly for passive investing that tracks an index. For the three years ended Aug. 31, investors added nearly $1.3 trillion to passive mutual funds and passive exchange traded funds (ETFs), while taking more than $250 billion from active funds, according to Morningstar.

Passive investment products can be powerful tools. But so is a chainsaw. In both cases, you need to know how to use them.

Passive investing may be appealing to some investors compared to traditional active investing such as stock picking, which is inherently difficult.

Investors who want to track market performance often prefer passive funds as a way to capture “beta” at a lower cost than active funds. In addition, traditional active funds often underperform their benchmarks.

Being too passive in one’s investing, however, is no panacea. For example, in a market downturn, a passive approach that “stays the course” through a correction in the broad market or a particular index can lead to significant drawdowns.

Another consideration, in our opinion, is that many passive index funds are market cap-weighted, with the biggest allocations going to the largest stocks in the index. That might lead investors to have greater exposure to a few stocks than they anticipated or desired.

A much better approach, we believe, is to focus on asset allocation. As a classic 1986 study published in the Financial Analysts Journal found, the potential return from “investment policy”—meaning, the selection of asset classes and how they are weighted—is the dominant determinant of portfolio performance. Investment strategy, such as picking particular stocks, was found to be much less of a determinant of performance.

At Astor, our fundamentally driven, macroeconomics-based approach focuses on asset classes—such as core equity holdings, fixed income, commodity, currencies, or real estate. We believe ETFs, which are low cost, transparent, and efficient, are the best instruments to provide this exposure. Moreover, we take a dynamic approach to asset allocation, as determined by the current trend in the U.S. economy, using our proprietary Astor Economic Index®.

We believe that when investors take a dynamic approach with a strategic holding (for example 20 percent of their overall portfolio) they can potentially gain the benefit of being more agile and responsive to economic conditions.) This is our approach to a ‘best of both worlds” strategy for being both passive and active, as advocated by some investment professions in the Wall Street Journal. 

At Astor, by putting our focus on asset allocation and with a finger on the pulse of the economy, our goal is to generate solid returns and mitigate risk, across the economic cycle.

 

 

 

All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

 The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.

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The Tension between Reacting and Overreacting: One Number Does Not Make a Trend

In asset allocation and investing, there is a natural tension between reacting and overreacting. The goal is to ensure you are skilled at the former, while avoiding the latter.

At Astor Investment Management, we believe our macroeconomics-based approach to asset allocation helps us react to what we determine to be real change in the economic trend. We reduce equity exposure (beta) when the economic trend weakens, and increase equity exposure as the economic trend strengthens.

What we don’t do is react to every little wiggle in a particular number. We often try to make this point in discussions with clients who may want to know what a particular “headline number”—be it GDP or the unemployment rate—means for investing. Our answer is that one number doesn’t make a trend. Rather, we use our proprietary Astor Economic Index® (AEI) to guide our asset allocation decisions.

To learn more about how the AEI guides our asset allocation decisions, watch this.

The AEI is designed to take a series of employment and output data and aggregate them into a single number. We think of this approach as taking a snapshot, in real time, of the economy; it is a “now-cast”—not a forecast—because we believe it is not possible to forecast recessions. The often-quote joke in finance (attributed to Nobel laureate and economist Paul Samuelson) is that the stock market has predicted something like nine out of the last five recessions.

Instead, we use AEI to gauge the strength or weakness of the current economic trend and then invest accordingly. We predicate this approach on a central insight drawn from our research into nearly 100 years of stock market returns, dividing those years into months when the economy was in expansion on the first day of the month and months when the economy was in recession on the first day of the month. On average, during periods when the economy was expanding, the stock market gained an average of 90 basis points (0.9%) per month. Conversely, when the economy was in recession, the stock market lost an average of 75 basis points (0.75%) per month.

These research findings underscore the importance of gauging and reacting appropriately to the economic trend. For example, when we are confident that the economy is in recession, as indicated by the AEI, we steadily and quickly reduce equity exposure and add more fixed income. During times when the economic trend is positive, we typically add equity exposure.

But we don’t make such moves arbitrarily or in reaction to one or two numbers. We use the AEI as a powerful tool for asset allocation and to help us stay the course even when the stock market appears to be overreacting to some number—for example, during stock market drops that are likely to be transitory during economic expansions. The stock market might sell off sharply for a short time, but if we see no change in the economic fundamentals, we will stay the course. In those instances, when the stock market comes back a short while later, we’ll give ourselves a little pat on the back for protecting our clients by avoiding overreaction. We don’t take credit for being “right”; rather, we credit the AEI and the discipline it infuses.

The most important investment decision, of course, is determining the ratio of stocks and bonds. At Astor, our rationale is driven by economic fundamentals. By using the AEI, we can discern the economic trend through the noise the data.

 

All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.

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Eyes on the Fed: No Urgency for a Rate Rise

All eyes are on the Federal Reserve this week and the often-discussed question: Will they or won’t they raise rates? Here at Astor, our prediction of what we believe the Fed will do (spoiler alert: we don’t expect a rate rise in September) comes down to two important data points: employment and inflation.

To learn more about The Fed, watch this video

These data points relate directly to the mandate of the Federal Open Market Committee (FOMC) as stated in The Federal Reserve Act, particularly to promote the goals of maximum employment and stable prices. In the chart below, the blue horizontal band represents the inflation target (roughly 2%) as set by the FOMC, while the pink vertical band shows the unemployment rate (roughly 5%).

fed

 

We can see that as of August 2016 (far left), the Fed has made progress in fulfilling its mandates. The unemployment rate has been cut in half, from the high of 10% in October 2009 (in January 2010 it was still a lofty 9.8%) to 4.9% in August 2016. Inflation, meanwhile, has been not been above the Fed’s target for more than a month or two.

Looking ahead, the question that we believe is on the collective mind of the Fed is what will happen a year or two out, particularly with unemployment being so low. Will a relatively tight labor market lead to higher wages and, in turn, force inflation higher, above the Fed’s target? Recent speeches and comments made by central bankers seems to us an FOMC that is divided on this issue.

The “hawks” have been making their case for raising interest rates; in their view, with unemployment being so low, inflation looks certain to increase. For instance, earlier this month, Federal Reserve Bank of Boston President Eric Rosengren said “a reasonable case can be made” for tightening interest rates to avoid overheating the economy.

On the other hand, the “doves,” who favor keeping interest rates steady, see additional slack in the labor market; with economic growth slowing, they don’t believe higher rates are necessary. Fed Governor Lael Brainard, for example, said in a recent speech that leaving rates unchanged since December 2015 “has served us well in recent months, helping to support continued gains in employment and progress on inflation.”

Here at Astor, our analysis of the Fed’s comments is that the FOMC will refrain from raising rates in September. (We’re not alone in that view: As the Wall Street Journal reported, the widespread expectation in the market is for rates to stay steady.) Come December, though—a full year after the last rate hike, and with another quarter of economic data to digest—we believe the Fed will take the next step and raise rates.

All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

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September Quick Read on the US Economy

I interpreted last month’s economic releases as somewhat weaker.  Forward looking surveys were concerning though consumer spending in the US, the most important single component of GDP, seems to be stable.

Our latest reading for the Astor Economic Index® (“AEI”) is lower over the month, though I see no discernible trend over the last twelve months.  I still see the US as currently growing above average. The AEI is a proprietary index that evaluates selected employment and output trends in an effort to gauge the current pace of US economic growth. 

aei

 

The nowcasts produced by the Federal Reserve banks of Atlanta and New York are both still showing stronger growth in the third quarter than the first half of the year.  The Atlanta Fed is currently estimating a gaudy 3.3% SAAR and the New York Fed is currently forecasting 2.8%.  These are both significantly stronger than their final Q2 estimates and represent a significant increase from the poor Q2 release.  Both have been updated since the employment report.

Another month of solid job growth means that the we are adding more jobs than needed to absorb the natural increase in the labor force.  We can also see strength in the labor force from some less-often discussed numbers such as the quit-rate which has increased 9% over the last 12 months and the number of job offers, which is at a high for the recovery.  These series can be seen in the JOLTS report put out by the Bureau of Labor Statistics.  On the other hand, there are still signs of higher levels of labor market slack than we would normally expect late in the cycle. The chart below shows unemployment (the headline number) and underemployment.   While unemployment is fairly low and roughly at the level targeted by the FOMC, underemployment shows significant additional slack in the labor market.

unemp-rate

 

The latest purchasing managers surveys from the Institute for Supply Management (ISM) were disappointing. 

pmi

The manufacturing index gave up much of its gains for the year.  I hope this is not a harbinger of renewed manufacturing weakness such as we saw in the first quarter of this year.  Surprisingly, non-manufacturing survey was also quite weak in August and it’s at the lowest level of the recovery.  A diffusion index (such as these) is a bit challenging to interpret exactly and a glance at the chart will show many months spike up or down without signaling sustained shifts in growth.  Digging into the details of the reports we see that much of this month’s weakness was due to drops in new orders and non-manufacturing exports.  This will bear close watching in coming months.

The hawks at the Fed seem to be getting louder, and one month’s survey data is, in my opinion, unlikely to deter them.  See this speech by San Francisco Fed President John Williams who makes the argument that 1) because the unemployment rate is low the Fed will need to raise soon and 2) better to raise sooner by less rather than later my more.  I see both those assertions as questionable (see Tim Duy for an argument about why it might make sense to let the unemployment rate drift lower) but I think a hike is coming in September or December assuming growth stays on its current course. For what it’s worth, my interpretation of Fed Funds futures prices shows that the market places a low possibility of a September hike but a likely hood of December hike.

 Overall, the economy continues its pattern of positive but modest growth.  The ISM numbers make me a bit worried about the fall.  As always I will be monitoring developments in the US economy carefully in the weeks ahead.  Clients are welcome to get in touch for a detailed conversation.

 The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.

 All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

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August Quick Read on the US Economy

My view on the economy is little changed over the month.  I still see the US in an environment of modest economic growth.  A second strong payroll number should quiet the concerns that a period of weakness is beginning.

Our latest reading for the Astor Economic Index® (“AEI”) is still near the highest level posted this year.  I still see the US as currently growing above average. The AEI is a proprietary index that evaluates selected employment and output trends in an effort to gauge the current pace of US economic growth.

usei.long

The payroll number beat expectations for a second month in a row, relieving concerns that any decline in growth is imminent.  There are no obvious signs of weakness hiding in the details and even real earnings are above where they have been in this long, tepid recovery.  Nevertheless, economists do expect payroll growth to moderate as the economy nears full employment, where many believe it is today, so don’t be surprised if average jobs growth in the next year is lower than the last few years.

The “nowcasts”(1) produced by the Federal Reserve banks of Atlanta and New York continue to show stronger growth in the third quarter than in the first half of the year.  The Atlanta Fed is currently forecasting a 3.7% SAAR (seasonally adjusted annual rate) for Q3 2016.  The New York Fed forecast for Q3 is 2.6%.

These forecasts are significantly higher than not only their own respective final Q2 estimates,  but also higher than the BEA’s (Bureau of Economic Analysis) recent release of their preliminary Q2 GDP estimate of 1.2%.

The combination of our proprietary AEI and the “nowcasts” cited above make me somewhat confident that today the US economy is doing fine and would require a shock of some kind to tip us into recession.

How will the Fed react to the passing of the Brexit vote and the bounce from payrolls?

Former Fed Chair Ben Bernanke had a very useful (though a bit wonky) post explaining how the FOMC in aggregate seems to have adjusted its expectations for the near future of the US economy.  The positive news is that the Fed has become more permissive in what counts as “full employment”, meaning the Fed should not be in as much of a hurry to choke off growth because of inflation fears.  On the disappointing side of the ledger, the FOMC seems to think that the US will grow more slowly in the future with GDP growth around 1.8-2% per year where they were hoping for 2.3-2.5% just a few years ago.

The low rate of growth and the continued low level of realized inflation suggest that The Fed sees the natural rate of interest (the level we might expect the Fed Funds rate to gravitate toward over time) to be lower than they calculated it to be before.

The bottom line is that the Fed should see the need to do less tightening to get to a neutral interest rate which may make the Fed more comfortable deferring its next hike.  In other words, lower for longer once again.

Nevertheless, I expect a few Fed speakers to try to remind the markets that they can hike in September, although I still expect a December hike.  To be clear, I do not think that another 25bp would have significant effects on the economy.

Overall, the economy seems to be holding to the same positive but low growth groove it has been in for the last several months.

 

 

(1) “Nowcast” is the GDPNow forecasting model of the Federal Reserve Bank of Atlanta and  “nowcast” is the Nowcasting report of the New York Fed. 

All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Analysis and research are provided for informational purposes only, not for trading or investing purposes. All opinions expressed are as of the date of publication and subject to change. Astor and its affiliates are not liable for the accuracy, usefulness or availability of any such information or liable for any trading or investing based on such information.

 The Astor Economic Index® is a proprietary index created by Astor Investment Management LLC. It represents an aggregation of various economic data points: including output and employment indicators. The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.

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