Good Life Advisors – Talking Points – Week 49
This week- Don’t Forget!!! Good Life is hosting an Intergenerational Wealth Transfer presentation presented by Cheri Brooks of Neuberger Berman this Thursday at 2:00 PM Eastern. Her presentation “Deepening Client Relationships and Growing Your Practice” was a highlight of the September GL conference. We hope you can join us for this unique practice management insight, it’s well worth the time.
Please use this link to register: https://www.eventbrite.com/e/good-life-presents-family-love-letter-with-cheri-brooks-tickets-480071796667
Please be on the lookout for an exciting practice management workshop presented by Ken Hamon of Alliance Bernstein- This will be a four-part series on Behavioral Finance and the psychology around money. It is not to be missed- The first session starts Friday, February 3rd at 1:00 PM Eastern and runs every other Friday until March 17th.
US equities were lower this week, more than reversing the prior week’s gains. All S&P sectors were lower for the week. Energy was the big laggard with Brent and WTI crude falling more than 10% each, the lowest close in more than a year. Through Friday, the S&P has declined in six of the prior seven sessions, remaining largely in retreat after hitting a recent high above 4000 after Chair Powell’s remarks on Nov 30th. Value fared slightly better than growth this week, but both factors were lower. Treasuries were mostly weaker, with the 10Y yield moving down near 3.4% before finishing the week nearer 3.6%.
It was a distinct risk-off week, though one short of major catalysts. Indeed, a major theme in the market narrative this week seemed to be next Wednesday’s FOMC meeting. While the Fed is expected to step down its hiking pace to 50bp from its recent 75bp pattern., there seemed to be anxiety about what the new Summary of Economic Projections (SEP) might indicate in terms of a terminal rate and how it might add color to the Fed’s consistent “higher for longer” messaging.
At the same time, there seemed to be little bright side to the unsettled economic growth outlook. Some recent firmer reports raise the specter of a more aggressive Fed (and raise the odds of a policy mistake). Concerns have also centered around recession signaling form a yield curve that is near its most inverted point in a generation, a sharp decline in excess liquidity, negative earnings revision trends, and some cautious management commentary. This week, for example, saw bank executives at a Goldman Sachs conference note that they are seeing some signs of slowing in consumer spending, though updates on loan growth and credit quality were benign-to-better.
There were not a lot of notable headlines this week. China’s well-telegraphed easing of Covid restrictions failed to generate an noticeable boost for the US, with expectations that normalization will be bumpy and Covid will remain some kind of growth drag. The G7’s price cap on seaborne Russian oil went into effect Monday, but decreased expectations for significant supply disruptions this week led to the unwinding of precautionary buys from earlier in the fall. There was much expectation ahead of Friday’s economic releases; but a slightly hotter November PPI came against some other softer inflation indicators.
Next week is likely to be much more consequential. The market is waiting for the FOMC meeting (on the 14th) with its accompanying Powell press conference. In advance of that meeting however, will be the November CPI report (out at 8:30 AM Eastern time Tuesday), with expectations core prices will have risen 0.3% m/m. Thursday will also see the release of November retail sales as well as the NY and Philadelphia Fed manufacturing indices.
November FOMC Statement November Fed Minutes Balance Sheet Reduction Plan Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots Treasury.gov yields FOMC Policy Normalization Statement Longer- Run Goals Jan 2022
Foreign Exchange Market
The sanctions on Russian oil don’t seem to be driving prices higher as expected. In fact, oil fell to its lowest level in a year, falling over 10% this week.
The Baker Hughes rig count showed a decline of 4 rigs this week. There are 780 oil and gas rigs operating in the US- Up 204 over last year.
Weekly Unemployment Claims – Released Thursday 11/23/2022 – The week ending December 3rd observed an increase of 4k in initial claims increasing to 230k. The four-week moving average of initial jobless claims was up 1k to 230,000.
November Jobs Report – BLS Summary – Released 12/2/2022 – The US Economy added 263 nonfarm jobs in November and the Unemployment rate was unchanged at 3.7%. Average hourly earnings increased 12 cents to $32.70. Hiring highlights include +82k Education and Health Services, +88k Leisure and Hospitality, and +42 Government.
- Average hourly earnings increased 18 cents/ 0.6% to $32.82.
- U3 unemployment rate remained at 3.7%. U6 unemployment rate increased 0.1% to 6.8%.
- The labor force participation rate was little changed at 62.1%.
- Average work week was declined 0.1 to 34.4 hours.
Job Openings & Labor Turnover Survey – JOLTS – Released 11/30/2022 – The number of job openings edged down to 10.3 million on the last business day of October, the US Bureau of Labor Statistics reported. Over the month, the number of hires and total separations changed little at 6 million and 5.7 million, respectively. Within separations, quits (4 million) and layoffs and discharges (1.4 million) changed little.
Employment Cost Index – Released 10/28/2022 – Compensation costs for civilian workers increased 1.2% for the 3-month period ending in September 2022. The 12-month period ending in September 2022 saw compensation costs increase by 5%. The 12-month period ending September 2021 increased 3.7%. Wages and salaries increased 5.1% over the year and increased 4.2% for the 12-month period ending in September 2021. Benefit costs increased 4.9% over the year and increased 2.5% for the 12-month period ending in September 2021. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Producer Price Index – Released 12/09/2022 – The PPI for final demand advanced 0.3% in November, seasonally adjusted, the US Bureau of Labor Statistics reported. Final demand prices also raoe 0.3% in both October and September (see table A). On an unadjusted basis, the index for final demand moved up 7.4% advance in prices for final demand services. The index for final demand goods inched up 0.1%. Prices for final demand less foods, energy, and trade services moved up 0.3% in November after rising 0.2% in October. For the 12 months ended in November, the index for final demand less foods, energy, and trade services increased 4.9%.
Consumer Credit – Released 12/7/2022 – In October, consumer credit increased at a seasonally adjusted annual rate of 6.9%. Revolving credit increased at an annual rate of 10.4%, while nonrevolving credit increased at an annual rate of 5.8%.
U.S. Trade Balance – Released 12/6/2022 – The US monthly international trade deficit increased in OCtober 2022 according to the US Bureau of Economic Analysis and the US Census Bureau. The deficit increased from $74.1 billion in September (revised) to $78.2 billion in October, as imports increased and exports decreased. The goods deficit increased $6.1 billion in October to $99.6 billion. The services surplus increased $2.1 billion in October to $21.4 billion.
US Light Vehicle Sales – Released 12/5/2022 – US light vehicle sales were at a seasonally adjusted annual rate of 14.144 million units in November, a decrease of 0.75 million.
PMI Non-Manufacturing Index – Released 12/5/2022 – Economic activity in the services sector grew in November for the 30th month in a row – with the Serves PMI registering 56.5% – 2.1 percentage points higher than October’s reading of 54.4%. The Business Activity Index registered 64.7%, a substantial increase of 9 percentage points compared to the reading of 55.7% in October. The New Orders Index figure of 56% is 0.5 percentage points lower than the October reading of 56.5%.
Recent Economic Date
Links take you to the data source
PMI Manufacturing Index – Released 12/1/2022 – The November Manufacturing PMI registered 49%, 1.2 percentage points lower than the 50.2% recorded in October. Regarding the overall economy, this figure indicates expansion for the 30th month in a row after contraction in April and May 2020. The Manufacturing PMI figure is the lowest since May 2020, when it registered 43.5%. The New Orders Index remained in contraction territory at 47.2%, 2 percentage points lower than the 49.2% recorded in October.
U.S. Construction Spending – Released 12/1/2022 – Construction spending during October 2022 was estimated at a seasonally adjusted annual rate of $1,794.9 billion, 0.3% below the revised September estimate of $1,800.1 billion. The October figure is 9.2% above the October 2021 estimate of $1,644.3 billion. During the first ten months of this year, construction spending amounted to $1,507.8 billion, 10.8% above the $1,360.8 billion for the same period in 2021.
Personal Income – Released 12/01/2022 – Personal income increased $155.3 billion, or 0.7% at a monthly rate, while consumer spending increased $147.9 billion, or 0.8%, in October. The increase in personal income primarily reflected increases in compensation and personal current transfer receipts. The personal saving rate (that is, personal saving as a percentage of disposable personal income) was 2.3% in October, compared with 2.4% in September.
Second Estimate of 3rd Quarter 2022 GDP – Released 11/30/2022 – Real Gross Domestic Product (GDP) increased at an annual rate of 2.9% in the third quarter of 2022, in contrast to a decrease of 0.6% in the second quarter. The increase in the third quarter primarily reflected increases in exports and consumer spending that were partly offset by a decrease in housing investment.
Chicago PMI – Released 11/30/2022 – Chicago PMI remained in contraction territory and dropped significantly in November from 45.2 to 37.2. This marks the lowest reading since June 2020.
Consumer Confidence – Released 11/29/2022 – The Conference Board Consumer Confidence Index decreased in November after also losing ground in October. The Index now stands at 100.2 (1985+100), down from 102.2 in October. The Present Situation Index- based on consumers’ assessment of current business and labor market conditions – decreased to 137.4 from 138.7 last month. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – declined to 75.4 from 77.9.
Durable Goods – Released 11/23/2022 – New orders for manufactured durable goods in October increased $2.8 billion or 1% to $277.4 billion. Transportation equipment led the increase up $2 billion or 2.1% to $97.8 billion.
New Residential Sales – Released 11/23/2022 – Sales of new single-family homes increased 7.5% to 632k, seasonally adjusted, in October. The median sales price of new homes sold in October was $493,000 with an average sales price of $544,000. At the end of October, the seasonally adjusted estimate of new homes for sale was 470k. This represents a supply of 8.9 months at the current sales rate.
Existing Home Sales – Released 11/18/2022 – Existing home sales decreased in October marking nine consecutive months of declines. Sales declined 5.9% to a seasonally adjusted rate of 4.43 million in October. Sales decreased 28.4% year-over-year. Housing inventory sits at 1.22 million units. Down 0.8% from September’s inventory, down 0.8% over last year. Unsold inventory sits at a 3.3-month supply. The median existing home price for all housing types was $379,100 which is up 6.6% from October 2021. This marks 128 consecutive months of year-over-year increases, the longest-running streak on record.
Housing Starts – Released 11/17/2022 – New home starts in October were at a seasonally adjusted annual rate of 1.425 million; down 4.2% below September, and 8.8% below last October’s rate. Building Permits were at a seasonally adjusted annual rate of 1.526 million, down 2.4% compared to September, and down 10.1% over last year.
Industrial Production and Capacity Utilization – Released 11/16/2022 – In October, Industrial production decoreased 0.1%. Manufacturing increased 0.1%. Utilities output decreased 1.5%. Mining output decreased 0.4%. Total industrial production was 3.3% higher in October than a year ago. Total capacity utilization decreased 0.2% in October to 79.9% which is 0.3% above its long run average.
Retail Sales – Released 11/16/2022 – US retail sales for October increased 1.3% to $694.5 billion and retail sales are 8.3% above October 2021. US retail sales for the August 2022 through October 2022 period were up 8.9% from the same period a year ago.
Consumer Price Index – Released 11/10/2022 – Consumer prices increased less than expected rising 0.4% m/m in October following a 0.4% increase in September. Consumer prices are up 7.7% for the 12-month period ending in October. Core consumer prices increased 0.3% m/m in October.
Next week we get data on Inflation data with the CPI out the 13th, Retail Sales, Capacity Utilization and Industrial Production as well as the most important FOMC meeting on the 14th.