Chief Economist Scott Brown discusses the latest market data.
It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery. In its updated World Economic Outlook, the International Monetary Fund lowered its forecast of global growth in 2020 to -4.7% (vs. a -3.0% estimate made three months ago).
Real GDP fell at a 5.0% annual rate in the third estimate for 1Q20 (same as the second estimate). Personal income fell by 4.2% in May, but “recovery rebate” checks and deposits had boosted income in April. Wage and salary income rose 2.7% (-5.7% y/y). Consumer spending rose 8.2% (-9.3% y/y) – adjusting for inflation, spending (70% of GDP) appears to be on track to fall at a 30-35% annual rate in 2Q20 (we should see a strong but partial rebound in 3Q20). Durable goods orders jumped 15.8% in May, but that surge largely reflected the fact that aircraft order cancellations (which show up as negative orders) were elevated in March and April. Ex-transportation, orders rose 4.0% (following an 8.2% decline in April). Jobless claims fell less than expected in the week ending June 20, to 1.48 million – still elevated.
Next week, we’ll get a lot of fresh economic data. The focus is likely to be on the employment report (on Thursday this month due to the Friday holiday). Labor market figures are currently subject to a number of quirks beyond the usual seasonal adjustment and statistical issues. The Bureau of Labor Statistics is reported to have worked harder to reduce the classification issue that led to an under-reporting of the unemployment rate over the last three months. Nonfarm payrolls should continue to reflect the initial rebound in economic activity. The ISM Manufacturing Index should be less weak.
|Last||Last Week||YTD return %|
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.2419||1.269|
|Dollars per Euro||1.1218||1.137|
|Japanese Yen per Dollar||107.19||107.79|
|Canadian Dollars per Dollar||1.364||1.313|
|Mexican Peso per Dollar||22.660||19.126|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.32||1.26|
As of close of business 06/25/2020
|June 29||—||Pending Home Sales Index (May)|
|June 30||—||Chicago Business Barometer (June)|
|—||CB Consumer Confidence (June)|
|July 1||—||ADP Payrol Estimate (June)|
|—||ISM Manufacturing Index (June)|
|—||FOMC Minutes (June 9-10)|
|July 2||—||Jobless Claims (week ending June 27)|
|—||Employment Report (June)|
|—||Trade Balance (May)|
|July 3||—||Independence Day Holiday (observed)|
|July 6||—||ISM Non-Manufacturing Index (June)|
|July 29||—||FOMC Policy Decision|
|July 30||—||Real GDP (2Q20, adv. est., benchmark revisions)|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
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