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Q2 GDP – Tapping on the Brakes - July 24, 2019

The first peek at Gross Domestic Product (GDP) on Friday will likely show a moderation in activity vs Q1.

  • Q1 posted a 3.1% annualized pace vs a forecast of 1.9% in Q2 (Econoday).

Yet, headline numbers can be misleading.

In Q1, soft consumer and business spending was offset by swelling business inventories and a surge in exports, which have been whipsawed by trade tensions.

Consumer spending rebounded in Q2, but exports have turned lower. Therefore, Q2’s headline may not reflect a firmer underlying economic tone.

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The Economy Takes New Ground - July 22, 2019

Fed official after Fed official has hinted at a rate cut at the end-of-July meeting. A rate cut is priced in. To forgo a decrease would likely create a jarring reaction in credit markets and among investors. The only question that remains – will we get a 0.25 percentage-point cut or a 0.50 percentage-point cut in the fed funds rate? Odds currently favor 0.25% per the CME Group.

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Fed Rate Cuts When Stocks are at All-Time Highs - July 17, 2019

Fed Rate Cuts When Stocks are at All-Time Highs

Last week, Fed Chief Powell all but green-lighted a rate cut at the July 31st Fed meeting and seemed to suggest additional cuts may be forthcoming.

The expected rate cut is coming at a time when the Dow1, the S&P 500 Index2 and the NASDAQ3 are at all-time highs (a/o 7/15/19 – MktWatch data).

Have central bankers cut the fed funds rate when stocks are at a record high? You bet they have.

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The Fed Sets the Stage for a July Rate Cut - July 15, 2019

The Federal Reserve is gearing up for July 31st rate cut and possibly additional cuts following Fed Chief Jerome Powell’s testimony before two Congressional committees. Last week, Powell didn’t explicitly say a rate cut is forthcoming. He’d never go that far. But his remarks opened the door pretty wide at the upcoming July meeting.

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Earnings, Profits, Earnings - July 10, 2019

Q2 earnings season is gradually getting underway.

  • Early reports are impressive relative to expectations (Refinitiv).

Analysts project Q2 S&P 500 profits will decline 0.1% from a year ago. Revenue is projected to rise 3.4% (Refinitiv a/o July 9; forecasts subject to change).

Key drivers—

  • Revenue growth is forecast to outpace profit growth for the second-straight quarter. That means margins are coming under pressure.
  • Look for commentary on the flare-up in trade tensions.
  • A strong dollar is set to chip away at sales of multinationals, as overseas sales must be translated back into a stronger dollar.

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