The H Group Blog

Investment and Financial Planning news from some of the best in the business.

Weekly Review - September 18, 2017

Website Administrator - Monday, September 18, 2017

Summary

Key economic data for the week included a disappointing retail sales report, slightly weaker consumer sentiment, moderately higher producer and consumer inflation and slightly improved jobless claims. As anticipated, several of these metrics appear to be affected by recent hurricane activity.

U.S. equities gained for the week in a variety of sectors, accompanied by a positive week in developed foreign markets, although tempered due to the negative impact of a stronger dollar. Bonds lost ground on the investment-grade side as yields rose, with foreign bonds affected more negatively due to currency. Commodities gained for the week, as energy prices rose sharply.

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Weekly Review - September 11, 2017

Website Administrator - Monday, September 11, 2017

Summary

The short week ended with a temporary respite for the federal budget and debt ceiling debate, strong ISM services results, but higher jobless claims due to hurricane effects.

U.S. stocks stumbled a bit on the week, as did foreign stocks in local currency terms, but the latter were saved by a large decline in the U.S. dollar for the week. Bonds experienced a positive week as yields for certain maturities fell to their lowest levels in some time. Real estate bucked the trend and fared well, while commodities were generally flat with offsetting forces.

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Weekly Review - September 5, 2017

Website Administrator - Tuesday, September 05, 2017

Summary

Economic news for the late summer week was focused on a revision higher in Q2 GDP results, continued expansionary manufacturing numbers, mixed housing results, and a somewhat disappointing employment report.

Equity markets fared positively for the week, with U.S. stocks outperforming both foreign developed and emerging. Bonds were flattish with credit outperforming, as did emerging market debt. Commodities saw positive returns with gains in a variety of categories, with the hurricane impact mostly affecting gasoline prices.

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Weekly Review - August 28, 2017

Website Administrator - Monday, August 28, 2017

Summary

In a very light late summer week for economic data, housing statistics were generally lackluster, jobless claims remained within recent ranges, while durable goods fell, as expected.

Global equity markets gained for the week, upon weak volumes and political rhetoric outweighing any meaningful economic news to move the needle. U.S. and foreign stocks both saw positive results, with emerging markets leading the way—foreign assets were boosted by a weaker dollar. Bonds also moved a bit higher, led by high yield. Commodities were mixed with little change in the prices for energy.

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Question of the Week - August 28, 2017

Website Administrator - Monday, August 28, 2017

Are we about to have another debt ceiling debacle?

It's certainly possible, but could be less likely than the prior mess in the summer of 2011. Stocks hit another patch of volatility mid-week, as the President threatened to hold up debt ceiling negotiations in September and even force a government shutdown until certain parameters were met. However, economists appear to be putting the odds of shutdown at far less than half, and Congressional sentiment appears focused on avoiding a shutdown this time. These are actually two separate bills—one to extend the ceiling and other a continuing resolution to keep the government running—both of which come due at the end of Sept.

Before this decade, threats over issues as serious as not funding the government were less common, so the idea of a bad outcome during these routine matters was less fathomable. The ceiling has been raised many times already over the years and has been considered merely a legislative formality. Some policymakers would like to abolish the rule altogether, noting the legislative process behind it creates more risk than benefit; others feel the procedure provides accountability and limits the 'blank check' of government spending.

This changed in 2011, as political polarization in Congress worsened and the game of 'chicken' progressed, so the chances of a miscalculation rose and caused markets to react very unfavorably. Debt rating agencies were also less than pleased, as Standard & Poor's actually proceeded with the downgrade of U.S. debt from AAA to AA+, while Moody's and Fitch retained the highest status, albeit adding a 'negative watch' caveat. This actually was, and still is, a big deal, since U.S. Treasury bills and bonds are considered the default global 'risk-free' asset with the idea of default virtually unthinkable. It's also a reminder that credit is not only a matter of ability to pay, but also the willingness to pay; the latter component was the clincher in that particular case. But, as expectations turned to hope, then to relief, the situation six years ago resolved itself and the debt ceiling was increased.

Odds of such an event appear lower this time around, despite Presidential rhetoric about closing government and holding out in an effort to fund 'The Wall', since it appears the involved parties recognize the importance of the matter and don't want to repeat the 2011 episode where investment markets and rating agencies didn't take such threats lightly. Fitch has again threatened a downgrade if Congress doesn't increase the limit, as they have before. (Yes, there is irony here in regard to the rating agencies—as a downgrade could happen from taking on more debt. Typically, limits on debt and lower overall borrowing levels tend to be a credit positive; but, in this case, the uncertainty over government operations and lack of funding for immediate coupon payments would outweigh the longer-term impact.)

Expect a lot more to come on the topic during the next few weeks—much of which could be just be political noise. This could include the inclusion of other legislation to incent passage of the bill, with haggling on both sides in the meantime, per usual. Fortunately, this is being taken as a more serious matter this time around.

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Weekly Review - August 21, 2017

Website Administrator - Monday, August 21, 2017

Summary

Economic data for the week was highlighted by mixed housing results but gains in retail sales, several strong readings from regional manufacturing surveys, and strong results for the index of leading economic indicators and jobless claims.

Global equity markets were mixed last week with U.S. stocks losing ground, and foreign stocks gaining slightly on net. Bonds were little changed along with minimal movement in interest rates, while emerging market bonds fared well. Commodities lost ground slightly with losses more concentrated in agriculture than in energy.

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Question of the Week - August 21, 2017

Website Administrator - Monday, August 21, 2017

Is LIBOR going away? By the way, what is it, anyway? Read Entire Article Here

Weekly Review - August 14, 2017

Website Administrator - Monday, August 14, 2017

Summary

Economic data was highlighted by weakness in inflation, with the PPI and CPI both coming in lower than expected. On the labor side, the government JOLTs job openings index and claims continued to show strength, while labor cost and productivity growth remained sub-par.

Global equity markets fell last week, in line with most risk assets, due to escalating geopolitical tensions with North Korea. Government bonds, by contrast, in both the U.S. and developed foreign markets fared well that that safe haven-seeking environment, and outperformed corporates and emerging markets. Commodities lost a bit of ground on net as oil prices fell.

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Weekly Review - August 7, 2017

Website Administrator - Monday, August 07, 2017

Summary

Economic data for the week was dominated by the employment situation report, which surprised on the upside. The ISM manufacturing and non-manufacturing indexes both declined, but remained solidly expansionary.

Equity markets gained globally, as did bonds to a certain degree with lower interest rates on the longer part of the yield curve. Commodities declined slightly, despite little net change in oil prices during the week. Overall, low volatility conditions in stock and bond markets continue.

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Weekly Review - July 31, 2017

Website Administrator - Monday, July 31, 2017

Summary

In a busy week for economic data releases, the Fed meeting resulted in no action and GDP for Q2 came in largely as expected. Durable goods orders and consumer confidence metrics came in more positively than expected, while a variety of housing data came in weaker than expected.

Equity markets were generally flattish in the U.S. last week, while foreign equities continued their string of gains, helped at least in small part by a weaker U.S. dollar. Bonds were mixed but generally lower on the investment-grade side as interest rates rose. Commodities gained along with sharply higher oil prices to end the week.

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