news & insights
As part of our proactive communications to keep you well-informed, we will post news and commentaries here on issues we believe you’ll be interested in. Feel free to contact us to discuss any of these topics.
March 21, 2023 | Monthly Reports
February 2023 Chart Book
The U.S. economy expanded at a 2.7% annual rate from October through December, a solid showing despite rising interest rates and elevated inflation. The government had previously estimated that the economy grew at a 2.9% annual rate last quarter. The report revised down the government's estimate of consumer spending growth in the October-December quarter, from a 2.1% rate to 1.4%. That was the weakest such showing since the first quarter of last year. Business spending also slowed in the fourth quarter, suggesting that the economy lost momentum at the end of 2022.
March 21, 2023 | Week Ahead
Week Ahead: Market Volatility Stays Until Bank Crisis Is Fully Resolved
One would not have expected the equity markets to actually rally amid a U.S. banking crisis – but because stocks are so oversold on a short-term basis and measures have been taken to help fix this crisis, a rally did indeed begin last week. As long as the banking crisis sparked by the SVB collapse continues and the Federal Reserve continues to raise interest rates, the markets will remain volatile. This Wednesday (3/22), all eyes will be on the rate decision by the Federal Open Market Committee (FOMC) as well as their comments on the future direction of interest rates. As of this writing, expectations in the market are split between a 25-basis point hike and a pause. Looking ahead, the market is pricing in rate cuts of up to 100 basis points. We have been here before, where the market expects future rate cuts only to have the Fed squash those expectations. This is a risk to the volatility of the markets. Read on.
March 14, 2023 | News
Longo Group Response to SVB Situation
We are providing this information in light of recent market volatility sparked by news related to Silicon Valley Bank (SVB). We know that situations like this can be unsettling and raise questions about the safety and security of your investments. We want you to know that we take your trust in us very seriously and are dedicated to keeping your assets safe and secure. That being said, we'd like to take a moment to explain why you can trust us, and those we choose to partner with, to protect your assets and feel confident about your investments.
March 13, 2023 | Week Ahead
Bank Run Fears Trump Fear of Higher Rates
As we near the Ides of March, there are widespread concerns that cracks are beginning to show in the U.S. financial system. But are we facing a historic turning point? We believe no. Last Thursday, concerns emerged on the credit risk of Silicon Valley Bank (SVB), and fear of a run on that bank spread like a contagion to other banks, particularly to the regional banks. This wave came on the heels of fears caused by the voluntary shutdown of Silvergate Bank, operated by Silvergate Capital Bank (SI), which was heavily leveraged to the crypto market. Higher interest rates now appear to be having an impact on a select area of the financial system. We must emphasize that the major commercial banks are heavily regulated and monitored and are required to have a solid capital base that satisfies Federal Reserve stress tests. These banks also have a more diversified business mix (unlike SVB and Silvergate). But these banks’ stocks were hit last Thursday and Friday in sympathy. The regional banks have broken down technically, indicating the likelihood these stocks are going to remain under pressure. The big banks are also under pressure – but not as bad as the regionals. The silver lining of last week’s action was a positive diversification created by a flight to safety as the Treasury market saw rates falling on both the short and long ends. This is a time for patience not panic as deposits are safe with the Fed backstopping this banking crisis. Historically, when policy makers begin to panic you are near the lows of the market. But do expect volatility to continue as the market digests what all this means. Read on.
March 6, 2023 | Week Ahead
Week Ahead: And So, We March Forward
Equity markets through the month of February have been consolidating the strong rally that emerged at the start of the year. Near term, there are oversold readings with the S&P 500 holding its 200-day moving average (3940, as of March 3) – at least so far. Turning to market breadth, the McClennan Oscillator, which measures momentum in market breadth similar to the MACD (moving average convergence/divergence), reached levels that historically have seen equity markets rally. Meanwhile, volatility measured by the VIX index is falling. This data points to a market that can rally or at least remain in a trading range. Many market participants are confused as to why the market has not fallen more, considering that interest rates are now expected to reach and possible exceed 5%. The likely reason is that, back in December, most sentiment surveys showed an extremely bearish bias with investment positions very defensive, including investors stockpiling mountains of cash. When most investors are positioned the same, the opposite generally happens. Note: sentiment indicators are contrarian by their nature.
March 6, 2023 | Monthly Reports
March Corner: The Ides of March a Market Turing Point?
March should prove to be an exciting month for the markets as it will be data-heavy with employment and inflation updates set to be released around the Ides of March. The next employment report will be on Friday, March 10, followed by CPI data on March 14 and PPI and Retail sales data on March 15 we get PPI and Retail sales. Each of these datasets will “betray” what’s happening with inflation – and we know that the Fed will be watching in the wings, anticipating its next move. Et tu, Mr. Powell?
February 27, 2023 | Week Ahead
Week Ahead: Inflation Remains in Focus, Arguing for Higher Rates
Last Friday, one of the Fed’s favorite measures of inflation, the PCE Core Price Deflator, came in hotter (4.7%) than expected (4.3%) – and the data had already been revised the previous month higher to 4.6% from 4.4%. So, this report was in line with the trend we just saw with the overheated CPI and PPI numbers. Data does not trend in one straight line so occasional upticks in inflation should be expected. This data will keep the Fed on the same course of raising interest rates as expected. The Terminal Rate is now expected to be 5.3%-5.5%. But examining the chart of PCE (below), it still looks like the data is peaking. Importantly, as long as interest rates are going up, markets will remain volatile.
February 21, 2023 | Week Ahead
Week Ahead: Bullish Breakout Should Not Be Bucked by Strong Data, Higher Rates
Despite the long weekend, folks are still thinking about last week’s surprisingly strong data: the numbers for the Consumer Price Index (CPI), the Producer Price Index (PPI), and retail sales all came in higher than expected. But let’s take a step back for a minute. The first thing we need to keep in mind is that the equity markets were overbought after a very strong rally in January. We had said to expect a pullback. Well, the pullback is here. And it’s been a controlled pullback – the markets didn’t really sell off too much.
February 13, 2023 |
Week Ahead: Staying The Course
So far, the Federal Reserve has been true to its word: as long as employment data is strong, the Fed’s actions will remain restrictive. Is the data strong? Right now there are 11 million job openings – near record highs! The concern is that there are not enough employees to fill the jobs that are open. The concern is that this could put upward pressure on wages, keeping inflation elevated. Fed Chair Powell did acknowledge that the Fed would now be data-dependent (just as we’ve previously said they were!). And what data will the Fed care about? This week’s CPI report for a start – which will also be important for the bond and stocks markets.
February 10, 2023 | News
January 2023 Chart Book
As markets remained in a tug of war with the Federal Reserve, Managing Director and Head of Advisor Solutions Richard Williams analyzes the month’s economic reporting in the January edition of the Chart Book, which highlights a slowdown in housing, retail and manufacturing amid a stubbornly tight labor market.
February 10, 2023 | News
February Corner: The Bull is Already Running
We retain our thesis that the Bull is already running – and we offer a slew of charts as evidence. But that doesn’t mean we’re ignoring the expectations for two additional rate hikes or the distraction that is the debt ceiling. Yet the market may already be pricing in these hurdles, as economists have begun to revise their forecasts, and a portrait of market resilience is now overshadowing the dread of a recession.
January 30, 2023 | Week Ahead
Week Ahead: As Goes January, So Goes The Year - It's Looking Good
Wall Street has an old adage: “As goes January, so goes the year” – which means that: if the January return in the equity market is positive, the full year will be positive, but if the month is negative, expect a negative return on the year. Need proof? Just look at 2022.
January 23, 2023 | Week Ahead
Week Ahead: Focus on PCE and GDP
As last week’s earnings and market data was mixed – delivering good news and bad news – the S&P 500 continues to test resistance at 4000 level despite the recent improvement in market breadth (i.e., the number of stocks advancing relative to those that are declining). What was that mixed bag of news?
January 17, 2023 | Week Ahead
This Week: Markets Cheer CPI Data
Last week’s CPI report came in as expected and the markets cheered. Although the level is still elevated at 6.5%, on a year-to-year basis, it does appear that CPI has peaked. As a result, markets will focus on the future direction of inflation, and we see that the bond market is already voting that inflation will be coming down.
January 10, 2023 | News
December 2022 Chart Book
In the December edition of the Chart Book, Managing Director and Head of Advisor Solutions Richard Williams breaks down the month’s economic data to close out 2022. Highlights included an increase in consumer spending which coincided with weakening in manufacturing and housing indicators.
January 3, 2023 | Week Ahead
This Week: Welcome 2023!
Last year is now in the history books and will be remembered (not fondly) for its Bear market in both stocks and bonds and the Fed’s warpath approach to fighting inflation by taking the Fed Funds rate from the zero-bound to 4.50%. Markets responded – as they should – by going down, down, down.
December 19, 2022 | Week Ahead
This Week: More Data, No Problem
This week we’ll see several key economic reports, including the PCE (Personal Consumption Expenditures) Price Index, housing starts and home sales, consumer spending and consumer confidence, and jobless claims. All important reports – but none that will move the needle on our above discussion points about what lies ahead.
