DoubleLine’s Jeff Mayberry and Samuel Lau salute both Sunday’s arrival of Halloween and the more controversial recognition of National Candy Corn Day on Saturday before running the market numbers for the week of Oct. 25-29. The last week of October delivered another strong performance from the S&P 500 Index, contributing to a strong month. Energy was down for the week but finished the month strong. Jeff and Sam break down the U.S. Treasury yields for the week with a note on how the shorter part of the curve might react to Fed Chair Jerome H. Powell’s talk on taper next week. Their market discussion wraps with the year-to-date performance of the volatile assets Bitcoin, up 115%, and natural gas, up 120%. Over in Macro Land, Jeff and Sam take a look at home price appreciation, GDP and the supply chain issues contributing to empty shipping containers and barren car dealer parking lots (10:56). Looking to next week, they preview ISM manufacturing and service numbers but predict the focus will be on Powell’s taper talk at the FOMC meeting – and how he will field questions on interest rate hikes (31:25).

Monday Morning Minutes

MMM Episode 39: Candy Corn Conflict, Natural Gas vs. Crypto and Lessons on Student Loan ABS

Portfolio Managers Jeff Mayberry and Samuel Lau with guest and DoubleLine Macro Asset Allocation Analyst Mark Kimbrough start with a review for week ended April 14 of stocks (including a look at banks) (2:24), fixed income (5:02), commodities (6:27) as well as the week’s macro news (8:48) and Fedspeak (17:45). For the Topic of the Week (20:29), Jeff and Sam dig into the details of the weekly initial and continuing jobless claims made for unemployment insurance benefits. Looking to the week of April 17-21 (32:23), Jeff, Sam and Mark have on their radar, among other items, more Fedspeak events, the release of the Federal Reserve’s Beige Book (Wednesday April 19), the Leading Economic Index of 10 leading indicators (Thursday) and the S&P Global Manufacturing and Services PMIs (Friday).

MMM Episode 111: Analyzing Jobless Claims and Fedspeak

After a recapping the mixed market week of May 15-19, DoubleLine’s Jeffrey Mayberry and Eric Dhall take on a Topic of the Week that looks at the in-the-headlines banking industry (13:04). Jeff begins the ToC section with coverage of a Federal Bank of New York blog post* with some interesting data on banking deposit activity from March 2022 to March 2023, when outflows accelerated amid the banking crisis. While that period marked almost $1 trillion in outflows, the activity was concentrated in the super-regional sector. That information leads to the question of the week: Does it matter to the banks if they have excess reserves? Will profitability go up if they have less deposits to pay for? (19:39) Jeff responds with a look at the need for the super-regionals to now pay put more to retain their deposits and what that means in terms of levering up. When not in a Fed tightening cycle, deposits are a very cheap form of having assets. 

Looking at the markets, the S&P 500 was up on the week (1:50) while the Agg was down (3:17). It was a light week in Macro Land (6:41), with retail and industrial numbers and a recession-flashing LEI print. Fed Chair’s Jerome H. Powell’s sitdown with former Chair Ben Bernanke offered up some prime Fedspeak (9:57), with Jeff and Eric discussing the event and its impact on the markets. Next week will deliver a lot of data (22:10), including PMI and personal income and savings numbers as well as the April PCE print.

*Bank Funding During the Current Monetary Policy Tightening Cycle
https://libertystreeteconomics.newyorkfed.org/2023/05/bank-funding-during-the-current-monetary-policy-tightening-cycle/

MMM Episode 116: Checking In on Super-Regional Bank Deposits and a Mixed Market Week

DoubleLine Portfolio Manager Samuel Lau and Quantitative Analyst Eric Dhall survey the markets’ July 22-26 scoreboard for stocks (0:59), fixed income (3:01) and commodities (4:29) before turning to the week’s macro news (5:54). Macroland produced an unequivocally robust preliminary estimate for second quarter GDP. This first of three GDP estimates for each quarter, Eric cautions, is “the least accurate because of revisions. That said, it was a home run, came in at 2.8% quarter-over-quarter annualized real, which is fantastic relative to the estimate of 2.0%.” Noting personal consumption “contributed 1.6% of that 2.8% GDP annualized,” Sam notes, “certainly the consumers are in there, really pulling their weight.” Sam and Eric, however, cautioned not to be mesmerized by the rear-view mirror of macro statistics. Looking through the windshield at  the road ahead (17:41), Sam and Eric will be watching July 29-Aug. 2 for the S&P CoreLogic Case-Shiller house price index updates through May and JOLTS job openings for June (Tuesday); the FOMC rate policy meeting and above all Fed Chairman Jerome Powell’s news conference (Wednesday); ISM manufacturing for July (Thursday); and the “Pizza Friday data,” i.e., the verdict of the markets on the news of the week.

Minutes

Taking “Home Run” GDP with a Grain of Salt (E175)

DoubleLine Quantitative Analyst Eric Dhall and Macro Asset Allocation Analyst Mark Kimbrough cover a very exciting market week of July 29-Aug. 2, including a very rough Friday for stocks. Eric and Mark review the end-of-week selloff in stocks triggered by Friday’s labor market report (00:36), look at a bond market rallying with incredible strength and a 2s10s inversion that has tightened considerably (3:52) and review a commodities market broadly selling off (6:31). It was a jampacked week in Macro Land, which included prints on home prices, job openings and consumer confidence (9:17). But Eric and Mark do deep dives into the two major events of the week: Wednesday’s exuberant Fed Day (15:16) and Friday’s market-moving unemployment report (21:54). On the former, they discuss the factors behind Fed Day’s dovish vibes, leading to their review of a very ugly picture painted by the new labor report. In their breakdown of the labor report, Eric and Mark explain why market followers are now referencing the Sahm recession signal and how it works. Next week will be a light one for macro (27:01), including a consumer credit print and the Senior Loan Officer Opinion Survey. This episode was recorded before market close on Aug. 2, 2024.

Dovish Fed Day Flies Into Sahm Recession Signal on Friday (E176)

DoubleLine Portfolio Manager Jeff Mayberry and Macro Asset Allocation Analyst Mark Kimbrough comment on the whipsaws in stocks, bonds and commodities that by the Aug. 5-9 week’s end left markets little changed. The risk-off selloff that began Friday Aug. 2 deepened Monday Aug. 5. But as Mark Kimbrough notes in his review of the week’s macro news (5:00), an upbeat ISM services report “came in for the rescue,” helping to lift stocks and in general lower risk premia. “Now that you look back,” Jeff Mayberry says, “it’s pretty funny seeing all the people calling for all these emergency cuts, and now here we are, down 4 basis points on the S&P on the week.”  

Looking ahead to “inflation week” (12:13)with producer and consumer price indexes for July due Tue. (Aug. 13) and Wed. (Aug. 14), respectively, and the University of Michigan consumer inflation expectations survey (Friday). Given the markets’ anticipation of fed funds rate cuts, starting in September, Jeff Mayberry notes the week of Aug. 12 could prove volatile, particularly given vacation-loaded schedules in August. “Everyone likes to joke,” Jeff Mayberry says, “that the junior traders are on the desk and tend to overreact vs. the old hands who have been through this before.”

A Volatile Week: Much Ado about Not Much? (E177)

DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau cover a positive Aug. 12-16 week for equities (0:49), fixed income (2:37) and commodities (5:27), supported by tame inflation readings (6:38) for July and surprising strength in retail sales (8:47). The macro picture and the latest Fedspeak, add up, they reason, to rate cutting, beginning at the Sept. 18 meeting of the Federal Open Market Committee, but not at an aggressive pace. Looking ahead to Aug. 19-23 (15:25), Jeff and Sam will be especially on the lookout for any policy nuances in Fed Chair Jerome Powell’s Jackson Hole retreat speech on Friday. Further out, they are keen to see the next labor market readings ahead of next month’s FOMC meeting.

Rate Cuts Still on Track But Perhaps Not So Aggressive (E178)

DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau cover an Aug. 19-23 week that brought gains for stocks (0:52) and a broad rally in fixed income (2:11) as well as a commodities market (5:15) that Friday ratified accommodative guidance from Fed Chair Jerome Powell in his Jackson Hole, Wyoming, symposium speech. The week’s macro prints (7:52), notwithstanding surprising strength in new home sales, likewise left intact expectations of cuts to the federal funds rate, with futures markets pricing in four quarter-point moves over the remainder of 2024, starting at the Sept. 18 meeting of the Federal Open Market Committee. The week of Aug. 26-30 holds little (16:49) in the way of big market movers in the scheduled macro releases. Among the reports on Jeff and Sam’s radar are durable goods orders (Monday) and PCE and University of Michigan consumer inflation expectations survey (Friday).

Stocks, Bonds, Commodities All Aboard on Rate Cuts (E179)

DoubleLine Portfolio Manager Samuel Lau and Analyst Mark Kimbrough review a benign Aug. 26-30 week for stocks (1:04); bonds (3:26), taking note of a flattening Treasury yield curve; and commodities (7:34), with gold nearing $2500 per Troy ounce as markets anticipate easing monetary policy at the Federal Reserve. On the week’s macro front (9:21), there was little in the way of market-moving news. With positive readings on the S&P CoreLogic Case-Shiller home price indices, Mark Kimbrough takes note of “faster growth still in the major metro areas as well as the rest of the country.” Among macro prints to watch for Sept. 3-6 (18:23), Sam and Mark single out the ISM manufacturing report (Tuesday), JOLTS job openings (Wednesday), ISM services (Thursday) and nonfarm payrolls and unemployment (Friday).

Benign Markets amid Muted Macro News (E180)

DoubleLine Portfolio Managers Jeffrey Mayberry and Samuel Lau welcome back the NFL and then tackle a rough Sept. 2-6 run for the markets, including lots of red across equities (1:09); fixed income (3:04); and commodities (4:39), with even gold feeling the squeeze. Over in Macro Land (6:03), Jeff and Sam review the prints impacting the market volatility, including ISM manufacturing and labor force reports, and what those numbers might mean for potential Fed moves at September’s FOMC meeting. As their Topic of the Week (12:50), they take a look at the possible de-inversion of the long-inverted U.S. Treasury yield curve as represented by the differential of the two- and 10-year Treasury yields (“2s10s”).* Jeff and Sam look at the six previous recession periods dating back to 1980 and how the 2s10s de-inversion fits into those recessions’ timelines. Next week (23:58), Jeff and Sam will be looking at the last batch of inflation and other metrics before the Fed convenes its FOMC meeting. This episode was recorded Sept. 6, 2024, before market close. 

*For more on 2s10s and the inverted Treasury yield curve, check out:

Episode 107: Timing the Lead Times of the Treasury Yield Curve

Episode 52: Yield Curve Flattening as an Economic Indicator

Rough Market Week Amid (Another) Emerging Recession Signal (E181)

DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau cover the week of Sept. 9-13, 2024, which saw positive performances for stocks (0:30); fixed income (2:00), including a recessionary signal in the form of a Treasury yield curve de-inversion; and commodities (4:30). Topping the week’s macro news (5:35) were the August CPI and PPI reports. For their Topic of the Week (10:44), Jeff and Sam discuss the two-year Treasury as a leading indicator and the three-month T-bill as a coincident indicator of the federal funds target rate. Looking ahead (18:06) to the week of Sept. 16-20, apart from the FOMC meeting and Jerome Powell news conference on Wednesday, Jeff and Sam will be watching for retail sales on Tuesday as well as jobless claims and the Conference Board’s Leading Economic Index, both on Thursday.

Leading Signals for Recession and the Fed Funds Rate (E182)

DoubleLine Portfolio Manager Jeffrey Mayberry and Quantitative Analyst Eric Dhall track the Sept. 16-20 week market activity leading up to and in the wake of the Federal Reserve’s big rate cut on Wednesday. Jeff and Eric look at a positive week for stocks (00:43), a down week for the Agg while the 2s10s spread de-inverted (2:00) and rising commodities boosted by energy (4:01). Over in Macro Land (5:20), prints they look at include retail sales, production numbers and what they might mean as a recession herald, jobless claims, and the LEI and its increasingly questioned data signal. They then turn to the big macro news of the week (the year?) for the Topic of the Week (9:40): the Fed’s cut of 50 basis points (bps) to the federal funds rate. Jeff and Eric talk about 25-bp versus 50-bp cut predictions, review Fed Chair Jerome H. Powell’s press conference and his talk of Fed “recalibration,” go through the Federal Open Market Committee’s Summary of Economic Projections and whether the Fed can still stick the soft landing. Looking at next week (21:37), prints will include U.S. PMI numbers; housing prices; consumer confidence; and annual revisions to GDP, which might be impacted by questions about employment data. This episode was recorded Sept. 20, 2024, before market close.

What’s the Impact of a Half-Point Rate Cut? (E183)

What’s the Impact of a Half-Point Rate Cut? (183)

DoubleLine Portfolio Manager Samuel Lau and Quantitative Analyst Eric Dhall review market activity and macro news for the week of Sept. 23-27. Sam and Eric talk another strong run of almost daily historic highs for the S&P 500 Index (00:38), a flat week for fixed income (2:18) and a positive week for the Bloomberg Commodity Index despite struggling WTI crude (4:07). Over in Macro Land (6:09), they dive into a full week of prints that delivered few, if any, surprises, including the S&P Global PMI manufacturing and services reports, a resilient housing market, weakening consumer expectations and a Personal Consumption Expenditures Price Index that could support further interest rate cuts by the Federal Reserve. Next week (16:48), Minutes will have a monthly markets wrap-up as well as coverage of labor market data. This episode was recorded Sept. 27, 2024, before market close.

Monday Morning Minutes

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