Jacob R. Overman, CFP®, CLU®, ChFC®, RICP® on LinkedIn: Another Challenge for the Fed to Contend With (2024)

Each week, a member of our Investment team delves into the ever-evolving financial landscape.This week, our Family Office AnalystNehemiah Whitediscusses market trends and the surprising turn of events in the opening trading week of 2024 >>Starting as we mean to go on?Investors hoping that markets would pick up where they left off in 2023 have been frustrated with the opening trading week of 2024. A reversal of the well cited, but perhaps outdated, ‘January Effect’ has taken place as we cross over into the New Year. The January Effect is a seasonal phenomenon in financial markets where stock prices have a tendency to rise in the first month of the year. This is usually attributed to year-end tax loss harvesting which suppresses stock prices in December, resulting in investors purchasing these securities at lower prices, driving the price back up through January. Whilst a potential source of arbitrage in the early-to-mid-20th century, it is widely accepted that a meaningful relationship between the opening month of the year and consistent returns no longer exists...Read more here > > https://lnkd.in/eAPCJDw3#JanuaryEffect #MarketTrends #FederalReserve #InterestRates #EconomicOutlook #MarketExpectations

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Abstract: Presidente Jay #Powell: "As I noted earlier, nearly all Committee participants expect that it will be appropriate to #raise interest rates somewhat further by the #endoftheyear. But at this meeting, considering how far and how fast we have moved, we judged it #prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy.As I noted earlier, since early last year, we have raised our policy rate by 5 percentage points. We have been seeing the effects of our policy tightening on demand in the most interestrate-sensitive sectors of the economy, especially housing and investment. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. The #economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The #labormarket remains very tight. Over the past three months, payroll job gains averaged a robust 283 thousand jobs per month. The unemployment rate moved up but remained low in May, at 3.7 percent. There are some signs that supply and demand in the labor market are coming into better balance. The labor force participation rate has moved up in recent months, particularly for individuals aged 25 to 54 years. Nominal wage growth has shown signs of easing, and job vacancies have declined so far this year. https://lnkd.in/d9XrMWCx

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The reality check for markets came on Thursday, when data from US payroll processing firm ADP indicated that 497,000 private sector jobs were added in June, more than twice the consensus estimate. The news stunned Wall Street. While the strength of the US labour market is likely to push out the likelihood of recession in the US, it also appears to nail on more aggressive interest rate rises by the Federal Reserve to combat what it termed “unacceptably high inflation” and quash any hopes of a rate cut during 2023.Wall Street suffered its biggest one-day fall since May, while the FTSE 100 fell to its lowest closing level in eight months. The two-year US Treasury yield hit a 16-year high in response to the news.

Rethinking Federal Reserve Policy in a Post-Covid World....it is clear that we need a different strategy from the Federal Reserve. One alternative is to directly target corporate profits. Instead of raising interest rates, the Fed could implement policies to reduce excessive corporate profits...or target companies for higher interest rates based on profitability. By redirecting these profits, we could invest more in employees' wellbeing, offer fair wages, and foster work environments that value employees' contributions beyond mere financial metrics. #interestrates #work #wellbeing #covid #strategy #inflation#fed#labor#cost#wageinflation#wage#stockmarkethttps://lnkd.in/dhTH77uZ

📰 Implications of Steady Wage Growth on Federal Reserve PoliciesThe market displayed a mixed performance with caution as market participants digested the potential for Federal Reserve rate hikes and the implications of June's jobs report. All eyes are now focused on the forthcoming CPI report, expected to be a significant determinant for future interest rates and overall market direction.Full article https://bit.ly/3JIMVbe

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The #BankofEngland left rates unchanged and Andrew Bailey said he doesn’t expect meaningful growth before 2025.Rates will remain high for an extended period given the elevated level of #inflation.But today is the first Friday of the month - #nonfarmFriday - so we’re having the SWEEPSTAKE!The #Fed voted to pause and market sentiment is leaning towards rates having peaked, but #Powell is still trying to persuade the market that another hike is possible.Today’s #nonfarmpayrolls data may add to that debate, where another bumper number could tip the balance towards a final #ratehike at the December meeting. Forecast is for 180k new jobs, after 336k beat forecasts for #TeamOver last time out. JOLT job opening confirmed plenty of new job opportunities are out there and the ADP private sector may have missed forecast, but 113k new jobs was up from the 89k seen last month. I’m feeling pretty bullish.I’m in it to win it at 225k for #TeamOverGood luck to you and game on!#Finance #FxPlew #news

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US WEEK AHEAD: Powell to Tell Lawmakers No Rush to Cut Rates(Bloomberg Economics)Recent data highlight that the long and variable lags of monetary policy may still be at work, which makes us wary of embracing the increasingly popular “no-landing” scenario for the economy. One area where we expected policy lags to be longest was the credit market — and re-emerging concerns about New York Community Bancorp., and by extension US regional banks, underscore the ongoing strains from tight monetary policy.Additionally, the weak ISM manufacturing print shows that even for a sector where the lags of monetary policy are short, a rebound could be derailed by spillback effects of monetary policy from outside the US. Japan, the UK, and Sweden are experiencing recession as their economies buckle from tight monetary policy, while China and Australia — two countries that rarely see recessions — are experiencing growth slumps.Another area that has yet to fully adjust to tighter monetary policy is the labor market. Although February’s headline nonfarm payrolls report (Fri.) may show a strong pace of hiring, much of that could be due to seasonal factors. Job openings (JOLTS, Wed.) are likely to decline, suggesting further labor-market cooling. Business surveys (Fed Beige Book, Wed.) are likely to be consistent with that, showing that firms are seeing a larger pool of job applicants and are more cautious about hiring.Meanwhile, Federal Reserve Chair Jerome Powell is expected to maintain a hawkish stance in his semiannual testimony to Congress (Wed., Thurs.), signaling to markets that the Fed is in no hurry to cut rates. If that leads to tighter financial conditions, it will keep the pressure on the economy and raise the chance of additional lagged impacts from monetary policy. For these reasons, we can’t fully back the notion that the effects of tight monetary policy are behind us or anticipate a reacceleration in the most rate-sensitive sectors, such the credit market.

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What will slower payroll growth mean for the #Fed's plans to combat #inflation↕️? Learn more with REDW Wealth Management Co-CIO Daniel Yu, CFA, CFP 🧑💼in his latest economic update.https://lnkd.in/gDGFydVr#interestrates#economy

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