Chief Economist Scott Brown discusses the latest market data.
The Fed’s Beige Book noted that “inflationary pressures remained strong” into April, with “steep increases in raw materials, transportation and labor costs.” The Russian invasion of Ukraine and lockdowns in China are adding to supply chain disruptions. In an International Monetary Fund discussion on the global economy, Fed Chair Jerome Powell said that a 50-basis-point increase in short-term interest rates was “very much on the table” for the May 3 to 4 monetary policy meeting.
Building permits and housing starts were mixed in March, as a softening in single-family activity was more than offset by strength in the more volatile multifamily sector. Existing home sales fell 2.7% in March (-4.5% y/y), reflecting reduced affordability and tight supply. Homebuilder sentiment continued to decline, as higher mortgage rates reduced expectations of future home sales.
Next week: There’s always uncertainty heading into the advance GDP estimate. A slower pace of inventory accumulation and a wider trade deficit should subtract from the headline growth figure for 1Q22 GDP, but underlying demand is expected to have been strong. Retail sales benchmark revisions, durable goods shipments and inventories, and the advance economic indicators (March wholesale and retail inventories and merchandise trade) could lead to some fine-tuning of 1Q22 GDP expectations. The Employment Cost Index is the preferred measure of labor costs (should be elevated). March personal income and spending figures will help to gauge the degree of momentum heading into 2Q22.
Treasury Yield Curve – 4/22/2022
As of close of business 4/21/2022
As of close of business 4/21/2022
All expressions of opinion reflect the judgment of the author and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business April 21, 2022.
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