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Return Stability and Downside Protection

Short-term interest rates have been in the spotlight recently due to the Federal Reserve’s post-pandemic tightening cycle, where the policy rate has been raised a total of 500 basis points from March 2022 to May 2023.  Many dislocations in financial markets have occurred because of this interest rate shock.  Most recently, a banking crisis of […]

Corporate profitability decelerated further in 1Q23.

In July of last year, we highlighted the historically fast pace of inventory accumulation over a period when producer prices were elevated. Additionally, over the last two years, we have observed a record-setting stretch of negative real average hourly earnings growth on a y/y basis. We have continued to highlight that the negative consumer setup […]

The outlook for consumer demand has not improved.

Last week, we highlighted the deceleration in retail sales and companies reporting a slowdown in consumer demand. In the current environment, where the trend in macro data has been negative, it’s important to also take a micro approach by looking at what individual businesses are experiencing and guiding towards. Over the next few weeks, we […]

Approving the Federal Budget

The President’s budget request was released on March 9th and features spending of more than $6.9 trillion (1), compared to last year’s request of $5.8 trillion (2) for FY23. The traditional annual budget process is complex and occurs in planned steps throughout the calendar year that are often adjusted for political purposes. The standard process […]

Consumer spending is trending lower.

At the beginning of the year there was a lot of conversation around a resilient consumer as the Personal Consumption Expenditures component of GDP accelerated. After that release, we highlighted the intra-quarter downward trend in that measure using the monthly series. More recently, we have seen spending trend lower in the monthly U.S. Census Bureau […]

U.S. 10-year Treasury yield declined despite rate hike.

On Wednesday last week, the Federal Reserve raised its target rate by twenty-five basis points to 5.00% – 5.25%. The pace of the current hiking cycle would suggest economic growth and inflation are accelerating. However, market-based indicators of those measures do not confirm that view. If long-term expectations for economic growth and inflation were accelerating, […]

A divergence in data from start to finish for 1Q23.

Going back to January, we expected to see a continued slowdown in economic activity. We observed a deceleration across consumption, production, and order growth throughout 2022 and noted we would likely see a deceleration in GDP if that trend were to hold. The q/q seasonally-adjusted annualized rate (SAAR) came in at 1.1%, a deceleration from […]

Global inflation measures continued to decelerate in 1Q23.

Consumer prices have mostly decelerated from their peak growth rates globally. The y/y percent change in the global quarterly aggregate has slowed compared to the prior quarter. On a rate of change basis, prices have slowed sequentially since 3Q22, and 1Q23 was the fastest deceleration since 2Q09.   Source: Macrobond.  Most countries peaked between the […]