Fed Chief Powell Talks, Investors Listen - February 12, 2020

Fed Chief Powell testifies on monetary policy before two Congressional committees twice a year. He’s talking Tuesday and Wednesday.

Representatives ask about the economy, but political posturing by both sides is inevitable. Tuesday’s Q&A with Powell uncovered nothing new.

On economic matters, Powell said the economy is in “very good shape.”

  • We’re in the 11th year of a record economic expansion.
  • “Job gains averaged 200,000 per month” in the second half of last year.
  • Consumer spending has moderated, but fundamentals supporting spending “remain solid.”
  • Manufacturing, exports, and business spending have been weak.

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Economic Growth Generates Job Growth - January 10, 2020

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls in January increased by a strong 225,000, while the unemployment rate rose to 3.6% from 3.5%.

The mild discrepancy: the data are taken from two separate surveys, which sometimes show minor inconsistencies. In this case, we saw new folks enter the labor force looking for work, which helped account for the minor uptick in the jobless rate.

That said, it was a good report that demonstrates that modest economic growth is generating new jobs.

If we take a three-month average, which helps smooth away some of the monthly volatility, it’s clear (and encouraging) that job growth has accelerated over the last six months.

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Stock Market Reaction to Past Epidemics - February 5, 2020

Friday’s selloff tied to the coronavirus in China lopped 603 points (2.1%) off the Dow Jones Industrial Average1.

  • It was the biggest one-day percentage decline since Aug 23 (St. Louis Fed data).

Stocks are not immune to volatility, as we’re well aware. When shares have experienced a big runup in price, they may be more vulnerable to unexpected events.

  • Today’s concern: the virus could slow economic growth in China, which ripples around the world.

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When Stocks are Priced for Perfection - February 3, 2020

When stocks are priced for perfection, the market can become vulnerable to unexpected events. Since early October, market tailwinds have been strong. These include low interest rates and an expanding Fed balance sheet via T-bill purchases, modest economic growth, and subsiding trade tensions.

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Reacting to the Unknown–Coronavirus - January 29, 2020

Stocks have repeatedly hit new hits. When shares are priced for perfection, they are more vulnerable to surprises. On Monday, stocks declined amid growing worries about an epidemic in China and its potential global economic impact.

Coronavirus has infected over 4,600 people and has killed 106, nearly all in China (CNBC as of January 28).

  • As of January 27, the Center for Disease Control (CDC) reported 5 cases in the U.S.

In comparison, preliminary flu estimates in the U.S. are much higher, but investors have ignored the numbers.

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