Friday, August 24, 2018
We’re beginning to get used to a dearth of meaningful economic news before the opening bell these days, and next week we can basically expect more of the same. Aside from a revision to Q2 GDP next Wednesday and the obligatory jobless claims figures Thursday, we have little data to drive the bus for the market, near term.
This changes somewhat by this afternoon, however, when we hear from Fed Chair Jay Powell following this week’s Jackson Hole retreat of Fed presidents discussing the present economy and what to expect in the future. Yet much of what Powell is expected to say has already been priced into the market: another quarter-point interest rate hike for September, with another still considered likely for December.
Things like trade tariffs, on the other hand, may be playing a greater role in the discussions of the Federal Reserve policy makers these days. What began as a campaign promise from Candidate Trump has now turned into concrete policy, complete with repercussions from most of our top trading partners.
Analysts will be parsing Powell’s words for language relating to these new realities, and what they might mean for future economic policies. We also know now President Trump’s preference for lower interest rates longer, though we don’t expect Powell to bring this up.
Ultimately, we will be looking for any nuances of change in policy considerations regarding inflation. We consistently have seen only tepid wage growth even in a tightening labor market, so we don’t really think radical changes in Powell’s viewpoint will be forthcoming today. Whatever shifts in the narrative are expected to be subtle and gradual.
We did see new Durable Goods orders ahead of today’s opening bell, however. Though we did see some push-back in the narrative that all is smooth sailing — a -1.7% headline read on July durable goods was below the expected -1.2% and well south of the previous month’s downwardly revised +0.7%. Stripping out Transportation, this figure improves to +0.2%, but that’s still beneath the +0.5% expected.
Capital Goods Orders (non-Defense, ex-aircraft) were strong, however: +1.4% from the +0.5% estimate. Just stripping out Defense, we see this number fall to -1.0%. This helps illustrate how a few extra airplanes per month on either side of the ledger can have a profound affect on these economic figures.
For this reason, we like to take things like new goods orders in context with other data, like manufacturing and consumer sentiment. But in late August, these types of things simply have to wait.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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Jackson Hole Wraps -- What Will Powell Say?
Friday, August 24, 2018
We’re beginning to get used to a dearth of meaningful economic news before the opening bell these days, and next week we can basically expect more of the same. Aside from a revision to Q2 GDP next Wednesday and the obligatory jobless claims figures Thursday, we have little data to drive the bus for the market, near term.
This changes somewhat by this afternoon, however, when we hear from Fed Chair Jay Powell following this week’s Jackson Hole retreat of Fed presidents discussing the present economy and what to expect in the future. Yet much of what Powell is expected to say has already been priced into the market: another quarter-point interest rate hike for September, with another still considered likely for December.
Things like trade tariffs, on the other hand, may be playing a greater role in the discussions of the Federal Reserve policy makers these days. What began as a campaign promise from Candidate Trump has now turned into concrete policy, complete with repercussions from most of our top trading partners.
Analysts will be parsing Powell’s words for language relating to these new realities, and what they might mean for future economic policies. We also know now President Trump’s preference for lower interest rates longer, though we don’t expect Powell to bring this up.
Ultimately, we will be looking for any nuances of change in policy considerations regarding inflation. We consistently have seen only tepid wage growth even in a tightening labor market, so we don’t really think radical changes in Powell’s viewpoint will be forthcoming today. Whatever shifts in the narrative are expected to be subtle and gradual.
We did see new Durable Goods orders ahead of today’s opening bell, however. Though we did see some push-back in the narrative that all is smooth sailing — a -1.7% headline read on July durable goods was below the expected -1.2% and well south of the previous month’s downwardly revised +0.7%. Stripping out Transportation, this figure improves to +0.2%, but that’s still beneath the +0.5% expected.
Capital Goods Orders (non-Defense, ex-aircraft) were strong, however: +1.4% from the +0.5% estimate. Just stripping out Defense, we see this number fall to -1.0%. This helps illustrate how a few extra airplanes per month on either side of the ledger can have a profound affect on these economic figures.
For this reason, we like to take things like new goods orders in context with other data, like manufacturing and consumer sentiment. But in late August, these types of things simply have to wait.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>