Unsteady Trade Headlines Overshadow Hindsight Economic Data Points

In the weekly State of the Markets video, Wayne Nelson and Seth Golden discuss all aspects of the macro and micro environment that reflects in the equity and debt markets. Please feel free to review the outline below as a guide for the video. 

  • Despite mountains of evidence highlighting the mistake, market participants (ranging from retail novices to institutional pros) continue to enter and exit their strategies at exactly the wrong time. For example, they chase returns and buy at the top, and also bail and sell at exactly the wrong time too.

  • Unless core PCE grows in the next few months, look for future Fed minutes to talk specifically about rate cuts ‪FED

  • Fed Meeting Minutes Extrapolation: Many participants viewed the recent dip in PCE inflation as likely to be transitory, and participants generally anticipated that a patient approach to policy adjustments was likely to be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective. Several participants also judged that patience in adjusting policy was consistent with the Committee's balanced approach to achieving its objectives in current circumstances in which resource utilization appeared to be high while inflation continued to run below the Committee's symmetric 2 percent objective. However, a few participants noted that if the economy evolved as they expected, the Committee would likely need to firm the stance of monetary policy to sustain the economic expansion and keep inflation at levels consistent with the Committee's objective, or that the Committee would need to be attentive to the possibility that inflation pressures could build quickly in an environment of tight resource utilization. In contrast, a few other participants observed that subdued inflation coupled with real wage gains roughly in line with productivity growth might indicate that resource utilization was not as high as the recent low readings of the unemployment rate by themselves would suggest. Several participants commented that if inflation did not show signs of moving up over coming quarters, there was a risk that inflation expectations could become anchored at levels below those consistent with the Committee's symmetric 2 percent objective—a development that could make it more difficult to achieve the 2 percent inflation objective on a sustainable basis over the longer run. Participants emphasized that their monetary policy decisions would continue to depend on their assessments of the economic outlook and risks to the outlook, as informed by a wide range of data.
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