July Quick Read on the US Economy

The economic news improved somewhat from my last update.  The labor market looks more solid than it did a month ago and there are some signs the manufacturing sector may have found it footing.  I believe the Brexit vote will likely have only a modest direct impact on the US, but will make all observers less confident of their predictions for global growth.  This summer, the fed may try to convince the market that it will hike again in September, but my guess is that the December will be the earliest.

 

Our latest reading for the Astor Economic Index® (“AEI”) is higher than last month, and at 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.

Source: Astor calculations

The labor market has been doing its noisy best to upset the stomachs of economists.  June’s payroll number showed a solid recovery from the weak numbers posted for April and May.  That being said, smoothing the series somewhat by looking at year over year percentage change shows that the US economy is still adding jobs but at a somewhat slower pace than has prevailed over the last few years.

The nowcasts produced by the Federal Reserve banks of Atlanta and New York are both still showing stronger growth in the second quarter than the first.  The Atlanta Fed is currently estimating 2.3 SAAR and the New York Fed 2.1.  These are both slightly weaker than last month’s estimate.  Both have been updated since the employment report.

 

The biggest economic surprise of the year has been the vote for the UK to leave the European Union.  At Astor, we were pleased to provide rapid reaction to this event on our blog on the morning and afternoon of the vote.  I think our analysis holds up well: see CEO Rob Stein’s take here and mine here.   As some of the dust has settled, short term implications for the UK economy are seen as dramatic by many economists.  For example, the panel of economists surveyed by Consensus Economics is now forecasting 1.1% growth in 2017, down from a 2.1% forecast last month.  Reductions for growth in the Eurozone are smaller.  Consensus Economics now forecasts 1.4% in 2017 down from 1.6%.  These same economists are not currently seeing significant direct effects on the US or the rest of the world.  The swift resolution of the UK leadership contest (with a new Prime Minister this week as opposed to the September time table originally announced) may offer grounds for optimism that a deal may cut short the period of uncertainty.

 

I see Brexit uncertainly leading to reduced investment by both firms and households as the primary channel affecting UK GDP.  To the to the extent that the uncertainly will have sustained spillovers into the financial markets it could have indirect effects on the US.  For example, the dollar initially rallied after the vote, but is now about the level that obtained in early June.  Should the dollar appreciate against our trading partners, it would be expected to make exporting more difficult.  In my opinion, the largest effect, however, seems to be in government bond yields.  US ten year yields have moved down 25 basis points to a yield of around 1.50% as this note is being written.  While, some of this may be safe haven demand that one can hope will be reversed as a path forward emerges, there are few of the other typical signs of investor fear.  Investors willing to take 1.5% for 10 years may be foreseeing long spell of a worrying lack of attractive opportunities for investment in the US and abroad.

 

When last we heard from the fed, their rate-raising plans were put on hold by the poor payroll numbers in April and May.  Does the decent report for June portend another hiking scare?  I think it is too soon to tell.  My interpretation of their speeches is that for the fed to raise rates they need to be convinced that the labor market is at full employment and that inflation will return to target in the medium term.  The last report has some points for both sides.  If the decision was finely balanced before, then in my opinion the Brexit vote strengthened the doves’ position.  Neither inflation nor the labor market are likely to see a boost because of it, and I imagine the decline in yields has the fed’s attention.  My guess is that a few hawks will try to make the case for a hike over the summer but that the fed will not hike before December.  For what it’s worth, the most common interpretation of rates implied by fed fund futures market sees only a small chance of a hike before the end of the year, as opposed to the situation in January when more than one additional hike was priced in.  A sustained return to the relatively robust labor market we saw over 2014-2015 would increase the likelihood of a hike.

 

Overall, I am relieved the labor market seems to have bounced back from a weak April and May, but I will feel better about the economy if we see this strength confirmed over the next few months.

 

 

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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June Quick Read on the US Economy

The economic news softened somewhat from my last update.  The payroll numbers for May were especially weak, following a modest April.  However, we should not exaggerate one reading of a volatile series Overall the economy still looks like it is on a decent heading, but evidence has accumulated of at least a small pause in growth.  This is likely to make the FOMC  put off rake hikes.

 

Our Astor Economic Index® (“AEI”) shows growth is lower than last month, though slightly above this year’s lows posted in February.  However, I still see the US as growing above average today. 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.png

Source: Astor calculations

 

In remarks made on June 6th, Federal Reserve Chair Janet Yellen called the May jobs report “disappointing and concerning”  but she still believed that the fundamentals of the economy are strong.  I tend to agree with the Chairman.  How weak was the jobs report?  In the chart below, I averaged the last three month’s increase in payrolls to smooth out the numbers.    As a result, the increase in payrolls has dropped to an average of 116,000 jobs over the last March-May period.  For most periods since 2012, the increase in payrolls has been in the 175,000-250,000 range, though it has printed this low a few times.  At this stage in the recovery, the s that it will take only 70,000-90,000 jobs a month to keep the unemployment rate stable.  In my opinion the current jobs  report is poor but we need to see additional signs of weakening before we move from concerned to alarmed.

 

payroll.png

Source:Bureau of Labor Statistics

 

It is not just Astor Investment Management who is still seeing the growth picture as somewhat positive.  The nowcasts maintained by the Federal Reserve Banks of Atlanta and New York both show stronger growth than the first quarter.  The Federal Reserve Bank of Atlanta is currently estimating 2.5% and the Federal Reserve Bank of New York is estimating 2.4%.  Both have been updated since the employment report.

 

Where does this leave the Federal Reserve?  The market no longer believes that the June meeting is a real possibility for a rate hike anymore.  I agree.  In Ms. Yellen’s speech, mentioned above, she gave cases both for and against another hike.  The main case for hiking rates is that as long as inflation is expected to return to its target of 2%, in the medium term the Federal Reserve should soon raise rates slightly, so as not to have to raise them a lot later.  The case against another hike is that there is probably still additional labor market slack beyond the 4.7% unemployment rate and that inflation has spent very little time above what is supposed to be a symmetric target in the last ten years.  In addition, the inflation expectations seem to be drifting down slightly, something Ms. Yellen said she will be watching closely.

 

Should the payroll weakness continue or inflation expectations drift down further, rate hikes would likely be off the table.  If, on the other hand, those indicators show renewed signs of a strong economy then the Federal Reserve may finally make the second hike.  Will the election delay things?  The Federal Reserve wants to be seen as divorced from the political scene. The Federal Reserve moved rates in the summer or early fall in 3 of the last 6 presidential elections, not including the crisis year of 2008.  September 21st is another press conference FOMC so expect speculation to be attracted to that meeting, assuming no dramatic surprises in the economy.

 

Overall, I am concerned about the state of the economy and while I expect the last, weak payroll to be an aberration, I will be watching the numbers with more than usual interest next month.

 

 

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 investment return and principal value of an investment will fluctuate and an investor’s equity, when liquidated, may be worth more or less than the original cost.


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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March Quick Read on the US Economy

In my opinion, the latest numbers on the US economy were positive last month. After plummeting for the first half of February, stock markets became markedly more positive over the second half. International equity prices seem to have regained their footing and oil prices are well off the lows of the year as well. I still see the global growth environment as tepid: with the US being the main bright spot. Despite the international headwinds, I expect the Fed to begin to signal it will continue to tighten according to plan.

Domestic highlights in February

Our Astor Economic Index® (“AEI”) shows growth somewhat above the recent average and slightly stronger than last month. 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.

I saw the employment report (nonfarm payrolls) for February as broadly positive. The number of new jobs was almost exactly at its two year average. I see no sign of broad based weakness in the economy when viewing the payroll numbers. Readers who want to burnish the negative case may have to dive into the weekly aggregate payroll. This number takes the number of employees and multiplies by the hours per week and again by dollars per hour. The result is something like a weekly wage bill and it posted a rare down month in February as hourly earnings and hours worked both posted modest declines.

In short: I think the pessimism in the first two months of the year were driven by fearful projections rather than data and that current views of the state of US economy are more realistic.

International environment

Last month, I was hoping for signs of strength in the world manufacturing cycle. It seems as if my hopes will have to wait at least until spring. While the Institute for Supply Management’s Manufacturing Index for the US showed a modest (but welcome!) bounce for the month, the picture in the rest of the world was not so rosy. The chart below weighs PMIs in roughly the G-20 countries, each one weighed by their GDP. This measure is looking for new low since 2012.

 

world.pmis.2016-03-04.png

Source: Institute for Supply Management, Markit, Astor calculations

The Fed

I believe the next red-letter day for the market should be FOMC Chair Yellen’s post meeting press conference on March 16th. Few expect the Fed to raise rates but many will be placing bets on the nature of the committee’s communications. Will the FOMC be hawkish or dovish? The Fed has repeatedly said they are data dependent and not tied to the calendar. However, as University of Oregon Economist Tim Duy has pointed out: we will need some clarity on which data they are dependent on.

In my view, the case for promising to raise rates again soon is that continued strength in the economy will move unemployment below the natural rate by a fair amount and perhaps for an extended period. In the view of Vice Chair Stanley Fischer for example, such labor market strength would risk setting off enough of an inflationary process that even larger rate hikes would be necessary to contain it.

However, I believe there are several complicating factors to give the Hawks a pause. First, is the tightening of financial conditions reflected in higher rates for corporate borrowers as well as the volatility and general decline of equity prices.  Second, inflation expectations, while hard to measure, may be declining. Inflation expectations derived from market prices are substantially lower than they were a year ago though survey-based expectations may have stabilized.  The chart below shows five year forward forecasts of CPI from surveys an derived from market prices.

infl.png

Source: Bloomberg, Federal Reserve bank of Philadelphia

My prediction is the Fed will raise not rates in either March or April and instead, focus on the tightening in the financial markets and weakness in inflation expectations in its released statement.  Therefore I am expecting the Fed to promise two or more hikes in 2016.   My preference (if I were a voter) would be for the Fed to make it clear that it is willing to be symmetrical around the 2% inflation target and would tolerate a year or two above the target as we have spent each of the last 8 years below it.

Conclusion

Overall, I am pleased to see continued growth in the US despite the tepid international environment. I expect the Fed to try to move back towards, but not fully achieve, its plan of four hikes this year.


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 investment return and principal value of an investment will fluctuate and an investor’s equity, when liquidated, may be worth more or less than the original cost.
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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February 2016 Quick Read on the US Economy

Our outlook for the economy deteriorated slightly in the last month.  Mainly our measures of output are showing weakness, while our measures of employment continue to show a solid recovery.  The risk is the manufacturing sector’s weakness spreads to the broader economy.  Most economists would agree the chances of this event happening are small, though we believe the chance is probably higher now than it was a few months ago.

Our Astor Economic Index® (“AEI”) shows growth somewhat above the recent average and slightly worse than last month.  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.

Source: Astor calculations

Source: Astor calculations

A carefully constructed gauge of the current state of the US economy is GDP Now from the Atlanta Fed.  This uses current economic data as released to try and ‘nowcast’ the current quarter well before the official GDP release.  Currently, this model is seeing the data released thus far for this quarter as consistent with 2.2% GDP growth (SAAR), roughly what the Blue Chip Survey is forecasting.

The important point is that as of the end of January, and despite the concerns sketched above, we do not believe there are signs of broad economic weakness and we believe it would take some additional shock to cause it.

It is just possible we see signs of the end of the deterioration in the world economy. The chart below weights all the G-20 countries by their GDP to average their respective Purchasing Managers Indexes.  These indexes are constructed to show expansion in the manufacturing sector at readings above 50 and contraction below 50.  The world, as a whole, according to this measure may have stopped deteriorating in the last few months after falling steadily from the middle of 2014.

Source: Markit, Bloomberg, Astor calculations

Source: Markit, Bloomberg, Astor calculations

The world equity markets obviously do not agree, with virtually all major markets posting large declines year-to-date.  We believe stock markets can overreact to every worry – the old joke is that they have predicted ten of the last five recessions. A more uncertain world environment may argue for lower levels of earnings and a reduction in the amount investors are willing to pay for them.

On the other hand, the global economic weakness of the last 18 months or so is probably more notable for the dramatic reduction in the price of oil and increase in the value of the US Dollar.  Neither oil nor the dollar has extended those trends so far in 2016.   The first rule when you find yourself in a hole is: stop digging.  Perhaps these markets have stopped digging.  We believe a stable market environment for energy and exporters would be a good foundation for the economy to build on.

We think the financial market volatility has increased the likelihood the Federal Reserve will delay its next rate hike.  The increase in credit spreads over the last few months, for example, has made financial conditions tighter than they were when the Fed last hiked (as noted by NY Fed chair Bill Dudley here). One implication of that is the Fed may need to adjust the federal funds rate less, given this spontaneous tightening.

Fed Chair Janet Yellen testifies before congress on Wednesday, after this note is being composed.  She will presumably attempt to mention financial market volatility but likely be careful to avoid saying anything of interest.  I expect her to reiterate the consensus that the US economy remains intact and that history has shown the US to be resilient to foreign economic conditions.  She will likely say, like the last FOMC statement, that she expects to see economic conditions evolve in such a way as to make a gradual increase in the federal funds rate appropriate.

Overall, I am a bit more concerned about the US economy.  There may be signs of stabilizing in the international environment, but I will need to see a few more months before I breathe easier.  I expect the Fed to not make matters worse in the short run, but at the same time, I do not expect them to take steps to stabilize financial markets absent a dramatic swoon.


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 investment return and principal value of an investment will fluctuate and an investor’s equity, when liquidated, may be worth more or less than the original cost.

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. 

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December Economic Read

The US economy continues its pace of modest expansion. Though self-sustaining growth continues to be the most likely outcome, a few soft spots – mainly related to weak growth overseas – continue to worry. I expect the economy to adapt well to the beginning of a shallow and gradual rate hike cycle.

Our Astor Economic Index® shows growth somewhat above the ten year average, though it is lower than a month ago. The AEI is a proprietary index which evaluates selected employment and output trends to try and gauge the current pace of US economic growth.

Good news first. The broad economy continues to expand as can be seen in the steady pace of jobs growth. It may be a promising sign for the future that construction jobs continue to grow at a slightly faster rate than they have since the Great Recession. The housing sector has been weak in the recovery and improvement would be welcome.

The weakness in the manufacturing sector continues as demonstrated by a range of indicators. The latest survey from the ISM was below the line demarcating manufacturing expansion/contraction, though this level is consistent with a growing economy, not a broad recession. This is also reflected in the index of industrial production. The manufacturing sub-index has been weak all year, though not nearly as weak as the mining sub-index.

Source: Bloomberg, Bureau of Labor Statistics, Institute of Supply Management

Source: Bloomberg, Bureau of Labor Statistics, Institute of Supply Management

I see this weakness mainly as a consequence of the slower pace of growth in the Chinese economy leading to broad emerging economy weakness which, in turn, is directly reducing prices on commodities produced in the US as well as reducing overseas demand for US produced intermediate goods. As part of the financial markets reaction to this adjustment the dollar has rallied about 20% against a broad currency index over the last 18 months. The IMF estimates that the dollar movement alone has reduced US GDP growth (by reducing net exports) by about 1% in the last few years.

Will this manufacturing recession spread to the rest of the economy? I do not believe recessions can be forecasted at significant horizons, so I will not lay odds. My guess, however, is that it would take significant further deterioration in the global environment for this to happen. And whatever odds you place on them, it is also possible that the headwinds the US is facing in the external environment will begin to dissipate or at least stop deteriorating next year, a slightly optimistic vision.

The continued decent growth in the US in the face of some overseas challenges is one of the reasons why the Federal Reserve will begin raising rates shortly. They seem to be anticipating the attenuation or reversal of growth constraining factors and hope that by starting rate hikes sooner they will not need to raise them as much. Additionally, if we take the Fed at their word, they are worried about labor market slack being close to completely used up.

If I were on the FOMC I would vote against a hike as the Fed’s inflation target does not seem to be close to binding any time soon and because I would be hoping to decrease the numbers of involuntary part timers as well as try to move the labor participation rate back higher, though demography limits potential gains.

Be that as it may, the Fed is still likely to initiate a rate hike, followed by a stately pace of follow-up rate hikes. Given that the Fed has not begun to shrink its balance sheet (maintaining a substantial stimulus) and that fed funds may only be around 1% a year from now, few serious observers are anticipating that this will seriously hurt the economy.

Overall, I am still cautiously optimistic on the US economy, though less so than last month and I will be watching developments in the export sector 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 investment return and principal value of an investment will fluctuate and an investor’s equity, when liquidated, may be worth more or less than the original cost.

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. 312151-336

August employment day economic read

  • My view of the US economy is for continued modest expansion. Our proprietary Astor Economic Index was essentially unchanged for the month and still showing that the US is solidly in an expansion.
  • Today’s employment report was almost exactly as expected with 215 thousand net jobs added and a steady unemployment rate of 5.3%. These are the solid, gradual improvement in the economy we have seen since 2013. Nobody’s view of the state of the economy or the likelihood of rate hike should have changed with this report. Nevertheless, be prepared to dodge the think pieces on the Fed as September’s meeting approaches.
  • I see contradictory trends emerging in the broader world economy.       On the robust growth side of the ledger the rest of the developed world seems to be stabilizing at levels of positive, if unspectacular growth. We see this, for example, in the Eurozone PMI making new highs for the year. (see chart below)
Source: Bloomberg, Markit, Astor calculations

Source: Bloomberg, Markit, Astor calculations

  • On the negative growth side of the ledger the primary story is the apparent weakness in China. Chinese economic statistics are widely thought to be unreliable but what we can see makes me nervous. If we look at the purchasing managers indexes for China they are at or near multi year lows and showing flat or decreasing orders. We see the same thing in areas which are highly exposed to Chinese orders: Hong Kong, Taiwan, South Korea and Australia for example. Chinese weakness is also a possible explanation for broader weakness in commodity prices. Led by oil, which were one of the more dramatic market developments last month.
  • The rule of thumb used to be “when the US sneezes, the rest of the world catches a cold.”   How contagious is China today? One worrying sign is that the volume of world trade (as measured by CPB Netherlands Bureau for Economic Policy Analysis) is showing an unusual contraction, at least through the latest report for May. Most areas are seeing contractions in volumes of imports and exports and more severe drops in the value of imports and exports. (The drop the value of trade is magnified by lower commodity prices.) While widespread, the drops are most severe in emerging Asia. The chart below shows the CPB volume of trade index with US recessions highlighted in pink. It will be interesting to see the reaction of the US economy if this decline continues. As can be seen in the chart sustained downturns in world trade have been associate with the last two recessions, though obviously a recession in the US would be expected to decrease world trade so causality is murky.
Source: CPB Netherlands Bureau for Economic Policy Analysis, Astor calculations

Source: CPB Netherlands Bureau for Economic Policy Analysis, Astor calculations

  • Overall, I see decent US growth but some worrying overseas developments.

Jobs day read on the US economy

• My current view of the economy is for continued, modest expansion in the US. The proprietary index we track as a primary gauge was modestly stronger over the second quarter, though still below the levels of the fourth quarter of 2014. Likewise, the Atlanta Fed’s current estimate

Source: Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of Atlanta


• The jobs market continued to improve in June as 223,000 jobs were added. This measure of employment has been in a fairly narrow range for years and seems unlikely to change meaningfully in the near future. Disappointingly, neither earnings nor hours seem to have increased last month.
• Coincident with the improvement in the economy is an move in expected inflation (as measured by various market measures) back toward the Fed’s long term 2% target. The FOMC members have said that inflation expectations being at the target and employment around potential are the two conditions necessary for rates to be normalized. Inflation expectations were weak in the beginning of the year, and while the Fed claimed to be looking through these readings, they have to be satisfied to see inflation expectations normalize.
Source: Bloomberg, Federal Reserve Bank of Philadelphia, Astor calculations

Source: Bloomberg, Federal Reserve Bank of Philadelphia, Astor calculations


• The view from the rest of the world is not so rosy. Europe continues to choose to allow 1% of the population take up all the time of the leaders of an entire continent. The situation is quite fluid and there do not seem to be any obviously good choices for anyone. The best news for US investors may be that the damage from five year train wreck is probably going to stay mainly on its own track, given the amount of time investors have had to worry.
• Mainly, but not entirely. At Astor we track an index of financial stress (similar to the Kansas City Fed’s Financial Stress Index but compiled on daily data). This index has spiked over the last week. It started at very low levels, however, and is still below where we get concerned but nevertheless it shows that other stress-sensitive spreads reacted as much to the Acropolis Apocalypse than they did to the crude or stock market sell offs in the fourth quarter of last year. Stress seems to be dissipating in the last two days but we will keep a close eye on this indicator.
Source: Federal reserve Bank of Kansas City, Astor calculations

Source: Federal reserve Bank of Kansas City, Astor calculations


• For global growth environment, our GDP-weighted measurement of the PMIs shows most of last month’s improvement was undone, though the measure still shows manufacturers’ orders expanding. The weakness is focused in Asia, with the PMIs for China little changed and the Asian economies whose most important trade relationship is China (Taiwan, South Korea, Australia) showing additional weakness. All three of these economies show shrinking manufacturing orders as measured by the Markit PMIs.
Source: Bloomberg, Markit, Astor calculations

Source: Bloomberg, Markit, Astor calculations


• Overall, the US is continuing to grow in a challenging external environment.