After covering a broad-based positive run in the markets for the week of Nov. 13-17, DoubleLine Portfolio Manager Samuel Lau and Quantitative Analyst Eric Dhall break down the latest Consumer Price Index (CPI) print (11:35), one that Dhall notes was greeted with a “sense of jubilation” by the markets, as it could support the end of the Federal Reserve’s interest-rate hiking cycle. In their review (13:03), Sam and Eric look at what sticky housing prices could mean for the Fed’s inflation fight and speculate that Fed Chair Jerome H. Powell must have been happy after opening the latest CPI report.

It was a very green week for the markets (2:45), with the S&P positive in 11 out of 11 sectors, the Agg notching a healthy month thus far (6:38) and even commodities enjoying an uptick (9:30). Over in Macro Land, aside from the CPI print, the week included a gloomy picture painted by small-business owners (12:10), some pretty ugly retail numbers (20:59), and some producer prices and import data that point to a deceleration in goods inflation. Turning to Fedspeak (27:45), Fed officials were out en masse with a consistent, cautionary message that the inflation fight is not over. MMM will be taking next Friday off but will be back Dec. 1, so there will be a lot of data to review when it returns (29:45), including new LEI, PCE and global PMI prints, and the second update to third quarter GDP numbers. This episode was recorded after market close Nov. 17, 2023.

Happy Thanksgiving!

Monday Morning Minutes

MMM Episode 142: Markets Express “Sense of Jubilation” While Fed Officials Caution Inflation

For the market week ended March 22, 2024, DoubleLine’s Samuel Lau and Mark Kimbrough recap a mostly positive week for equities (2:39) and fixed income (4:03) while commodities dipped (6:43). For the Topic of the Week (13:20), Sam and Mark do a deep dive on this week’s Federal Open Market Committee (FOMC) meeting and subsequent press conference by Federal Reserve Chair Jerome H. Powell. A quarterly meeting means a Summary of Economic Projections (SEP) from FOMC members, so after reviewing the rates and changes, if any, Sam runs through the new SEP forecasts, with some notable updates. Mark parses the Fedspeak in recapping Powell’s press conference (20:34), observing that while the SEP forecasts seemed rather hawkish, Powell’s statements seemed on the dovish side.

In their review of Macro Land (7:28) for the week of March 18-22, Sam and Jeff’s coverage includes job data, a preliminary manufacturing PMI print and a Leading Economic Index report that raises more questions on how to read this recession gauge. Looking ahead (29:00), the Good Friday-shortened week of March 25-28 will bring numbers on jobs, home prices and consumer confidence while the PCE print will come out on the holiday of March 29.

Because of the holiday next week, Minutes will be recording Thursday, March 28.

*For more on the topics covered in this episode, check out:
Episode 112: Red Week, Recession Metrics and the Overnight Reverse Repo Facility
Episode 58: Hard Look at the Fed’s Rare “Soft Landings”
Episode 21: Excess Reserves
Episode 18: Fed’s overnight reverse repurchase agreement facility

FOMC Fedspeak: Hawkish or Dovish? (E158)

DoubleLine Portfolio Managers Samuel Lau and Jeffrey Mayberry review the market week of March 25-28, 2024, shortened by the Good Friday holiday. Sam and Jeff also recap March and first quarter performances for equities, fixed income (3:59), commodities (6:24) and Bitcoin (9:13). Over in Macro Land (9:39), they look at housing prices, jobless claims and a GDP fourth quarter estimate, noting that the markets will be closed when the PCE and personal income prints are released Friday. In addition, Sam and Jeff discuss market expectations for Federal Reserve rate cuts this year – still hanging in at three – and the status of the Fed’s overnight reverse repo facility. Looking ahead (15:38), next week’s prints will include ISM manufacturing and services PMI data, a JOLTS update and employment numbers from ADP and the U.S. Bureau of Labor Statistics. This episode was recorded March 28, 2024, before the close of trading.

Q1 2024 Is in the Books (E159)

After their review of equity (1:08), fixed income (2:20) and commodity (4:14) markets for the week ended April 5 and of recent macro news, DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau for their Topic of the Week (16:14) discuss the Treasury General Account and the relationship between TGA balances, Treasuries securities issuance and the duration of the Treasury market. Then Jeff and Sam highlight the important upcoming macro items (30:13) for the April 8-12 market week, including March prints of the consumer and producer price indexes.

TGA Balances and Treasury Securities Duration (E160)

DoubleLine Portfolio Manager Samuel Lau and Quantitative Analyst Eric Dhall review the market week of April 8-12, for stocks (1:04) and fixed income (5:05). Both asset classes were stung by the April 10’s report of a hotter-than-expected consumer price index in the March, although bonds staged a partial comeback Friday on a safety trade driven by fears of an escalating conflict in the Middle East. Samuel Lau next covers commodities (10:19), which stayed in the green for the week. In the macro discussion for the week (12:29), Eric Dhall takes a look under the hood of the March CPI report. In particular, he notes some troubling data in the services sector, which accelerated from 0.35% month-over-month in February to 4% in March. Sam Lau surveys (26:43) the week’s Fedspeak and the declining probabilities price into the fed funds figures market for more than one rate cut in 2024. Looking ahead to the week of April 15-19 (30:55), Sam and Eric have their sights trained on retail sales (Monday); industrial production, capacity utilization and manufacturing production (Tuesday); the Fed’s Beige Book release (Wednesday); and jobless claims and the LEI (Thursday).

A Market Squeeze on Hotter Inflation, Falling Rate Cut Expectations (E161)

As DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau note in their survey of markets for the week ended April 19, both equities as tracked by the S&P 500 (0:52) and fixed income as tracked by the Bloomberg US Aggregate Bond Index (3:32) ended in the red while commodities (8:07) continued month-to-date to be a sanctuary of positive returns. In his review of the week’s macro prints and Fedspeak (10:22), Jeff takes issue with the Conference Board “kind of changing the goal posts” with regard to reading its Leading Economic Index. The LEI has been flashing recession ahead since July 2022. Looking ahead to the April 22-26 market week (19:05), the most important macro bogeys on Jeff and Sam’s radar are the advance estimate of 1Q2024 gross domestic product (Wednesday) and the Personal Consumption Expenditure Deflator (Friday).

Red Stocks and Bonds, Green Commodities (E162)

For the week ended April 26, 2024, DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau review equities (1:00), fixed income (3:25) and commodities (5:52) markets. Then they discuss the week’s macro news (6: 46), including more reports of sticky inflation and slower-than-expected growth as evidenced in the preliminary GDP estimate for 1Q2024. For their Topic of the Week (14:16), Sam and Jeff explain stagflation, concluding that this phenomenon so far is absent, but it behooves investors to be on the lookout for it if growth slows further amid stubborn inflation. Looking ahead to the April 29-May 3 macro calendar (23:48), they will be especially interested in the Treasury quarterly refunding Wednesday, which front runs the Federal Open Market Committee meeting the same day. While markets have priced in the FOMC standing pat on the federal funds rate, Jeff Mayberry will be watching Fed officials’ guidance on a possible tapering of quantitative tightening.

Looking Out for Stagflation, Slower QT and Tsy Refunding Hiccups (E163)

DoubleLine Portfolio Managers Jeff Mayberry and Samuel Lau review stock (0:57), bond (2:46) and commodity (5:40) markets for the week ended May 3, including notable volatility in equities and fixed income in the wake of inflation data, Fedspeak and jobs data. Then Jeff Mayberry walks through the week’s macro news (7:25), including data showing sticky inflation, accelerating house price appreciation and some progress in job openings and unemployed people moving closer toward balance. 

For their Topic of the Week (19:14), Jeff and Sam dissect the policy guidance coming out of the May 1 meeting of the Federal Open Market Committee and Fed Chair Jerome Powell’s news conference, including plans to taper the rate of Fed balance sheet roll-off. The week of May 6-10 offers a relatively light macro schedule (34:17). Among the data points to watch for are the Senior Loan Officer Opinion Survey on Bank Lending Practices (Monday) and, because Fed Chair Jerome Powell uses it, the University of Michigan’s survey of consumers’ inflation expectations (Friday).

Market-Moving Prints, Tapering QT and Powell’s Purple Tie (E164)

DoubleLine Portfolio Manager Samuel Lau and Quant Analyst Eric Dhall kick of their review of the May 6-10 market week combing through a green field of equities. The utilities sector is proving quite the player in 2024 while the leaders of recent previous quarters continue in their new roles as laggards. In fixed income (4:16), it was a mostly flat week for U.S. Treasury yields and the Agg. Commodities delivered for another week with gold continuing to flex (5:59). 

Over in Macro Land (7:11), a light week brought a tighter-for-longer narrative in the latest Senior Loan Officer Opinion Survey, leading Sam and Eric to discuss how different businesses are experiencing the current economy. The bears got some food this week from a spike in initial jobless claims (11:55), and the University of Michigan Consumer Sentiment Index provided some insight into the Wisdom of the Common Person in regard to inflation expectations (12:47). The week’s Fedspeak roundup tracks Fed officials maintaining the message on persistent inflation (16:19). Looking ahead to a week of inflation prints (20:34), including PPI and CPI, Sam and Eric will also be keeping an eye on retail sales, import prices and the LEI. This episode was recorded May 10, 2024, after market close.

Senior Loan Officers: Tighter for Longer (E165)

DoubleLine Portfolio Manager Jeffrey Mayberry and Quant Analyst Eric Dhall recap a green trifecta for equities, fixed income and commodities for the week of May 13-17, powered by the CPI report, the main macro story. The CPI print was loved by the market, which is anxious for any signs that support the Federal Reserve cutting interest rates. Macro Land coverage also includes the NFIB Small Business Optimism Index, the Producer Price Index, weakening retail sales numbers and higher import prices. Next week will be a pretty light week, including the release of Fed minutes for the April-May meeting, global manufacturing and services data, and a durable goods report.

For the Topic of the Week, Jeff & Eric look at the Federal Reserve Bank of Atlanta’s GDPNow print and discuss how it was recently revised higher despite a backdrop of weak economic data*. They discuss the components of the GDPNow print and its calculation, with Jeff & Eric noting that it is normal for the number to fluctuate before settling in.

*For more information on tools used to forecast GDP, check out Episode 14: Recap of the May 3-7, 2021, market week.

CPI Feeds a Green Trifecta (E166)

DoubleLine Portfolio Manager Samuel Lau and Quantitative Eric Dhall review a mixed showing the week ended May 24, 2024, for stocks (1:09), bonds (4:04) and commodities (5:47). Turning to macro news (6:57), they note May 1 FOMC minutes show befuddlement among Fed officials over the degree of restrictiveness that has been achieved by interest rate policy. Over the week, as the yield curve steepened, federal funds futures pricing shifted (14:18), indicating the odds of rate cuts in the remainder of 2024 fell from 1.8 cuts to 1.3. Looking ahead to the abbreviated market week of May 28-31 (15:06), Sam and Eric will be on the lookout for the S&P CoreLogic Case-Shiller house price index prints for the month of March, Conference Board Consumer Sentiment for May, the second estimate of first quarter GDP, personal income and spending, and Core PCE Price Index.

MMM Episode 142: Markets Express “Sense of Jubilation” While Fed Officials Caution Inflation

Monday Morning Minutes

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