Why Is Break-Even Inflation Falling in the United States?
Break-even inflation rate is used to assess the inflation expectation of market participants. The downturn in ten-year break-even inflation isn’t as sharp as the downturn in five-year break-even inflation.
The breakeven inflation rate is used to assess the inflation expectations of market participants.
When the Federal Reserve refers to inflation, it is talking about the rate of change in PCE inflation. This is the price index for personal consumption expenditures.
Percentage of Organizations with Matured Cloud Adoption in Each Country
Cloud is moving into a second wave of adoption. Organizations are leveraging cloud to fuel innovation, growth, and disruption.
Radware (RDWR) is a global leader of application delivery. It provides a security solution for virtual, cloud, and software-defined data centers.
Splunk generated returns of -1.38% in the TTM and -15.50% in the trailing one-month period. Its share price fell by 3.87% in the trailing five-day period.
Dollar Index Falls as US ISM Manufacturing PMI Hits 2-Year Low
Early on September 1, the US dollar index fell down to the day’s low of 95.19 after reports of weak Chinese PMI numbers.
China, the manufacturing hub of the world, has been recording sluggish growth. China’s August PMI numbers were at 47.3, below the crucial level of 50.
The U.S. Bureau of Labor Statistics published its data on nonfarm payrolls and unemployment claims on September 4. The dollar spiked to 96.57 at the time the data were released.
Cause to Be Cautiously Optimistic about US Equities
My cautiously optimistic view comes with two caveats. First, in today’s slow growth world, it won’t take much to knock the US economy off of its trajectory.
Corporate profits from current production, including inventory valuation and capital consumption adjustment, rose by $47.5 billion in 2Q15.
The benchmark-tracking SPDR S&P 500 ETF Trust gained 2.47% on August 27, as the US Bureau of Economic Analysis came out with its second estimate for the 2Q15 gross domestic product.
Freeport-McMoRan Leads SPY by 5.03% on September 10, 2015
The SPY rose 0.54% on September 10. US investors, despite the Fed’s upcoming rate hike decision, were calm. All SPDR sectors except utilities rose.
The SPY has been rising subtly after its humble start on September 1. The rising US dollar reflects the growing strength of the US economy.
After considerable variation in late August, the SPDR S&P 500 ETF (SPY) experienced fewer fluctuations on Thursday, September 3.
Why Higher Rates Are Unlikely to Derail the Recovery
The Fed then has to hike rates in order to curb inflation. Higher rates, however, negatively affect growth.
A nominal midyear rate hike in the US could have affected at least the first stage of liftoff, and the process of monetary policy normalization could have begun.
Potential new developments from the Fed include a suggestion by the subcommittee on communications that median values of policymakers’ projections be published.
Teco Energy Surges by a Record High of 25.01% on September 8
On September 8, the Tampa-based Teco Energy (TE) rose to $21.07 from $26.34. The company announced that it was bought by Emera for $10.4 billion.
The SPDR S&P 500 ETF (SPY) rebounded on September 8 and rose by 2.51% after a trailing five-day return of -0.12%.
Large caps tend to outperform small caps in rising interest rate scenarios, while small caps outperform large caps when interest rates are low or falling.
Avoid Momentum Stocks, as Volatility Could Pick Up
Momentum stocks are those that are more likely to keep moving in the upward trajectory.
Commodity producers ExxonMobil (XOM) and Chevron (CVX) reported their worst earnings in six and twelve years, respectively.
Within the cyclical sectors, technology and financials are probably best positioned to ride out a rising rate environment.
If the Economy Slows, Can the US Labor Market Slack Widen?
Although the employment-to-population ratio shows a clear rising trend, the labor force participation rate is trending down. Some of that fall can be attributed to people leaving the workforce completely.
While the US labor market is technically close to full employment, it’s not quite there yet. Further, slack persists in the market.
A falling unemployment rate indicates higher business activity. This translates to overall growth supported by higher consumer and business spending.
Investors Should Watch These Economic Indicators This Week
The most important indicators for this week will be US retail sales, the UK’s CPI, and US consumer sentiment.
The US Consumer Price Index rose 0.1% in July 2017, compared with no change in June 2017, falling short of the market’s expectations of a 0.20% rise.
The UK Services PMI stood at 53.8 in July 2017, compared with 53.4 in May, beating the market expectation of 53.6.