• Consumer spending in February recovered from a weak start to the year, with real spending exceeding expectations.

 

 

  • The savings rate, as a percentage of disposable personal income, decreased.

 

 

  • The February PCE inflation figure came in slightly below expectations (the chart shows monthly changes).

 

 

  • The ISM Manufacturing PMI finally returned to growth in March, topping expectations.
  • In response to the robust ISM PMI report, the market scaled back the anticipated Fed rate cuts for this year.
  • Construction spending unexpectedly declined in February, amid softer private nonresidential construction and weaker public construction expenditures.
  • Treasury yields have been trending higher.

 

 

  • The ISM Services PMI fell short of expectations, indicating slower consumer spending and weaker economic growth…..BUT a higher likelihood that the Fed will cut rates sooner.
  • The employment index remains in contraction territory, which could indicate slower job growth. The market likes this too since it also indicates sooner rate cuts.
  • Fewer service firms are reporting rising costs, signaling slower supercore inflation.
  • Short-term Treasury yields fell following the ISM Services report, while longer-dated yields continue to climb.

 

 

  • Mortgage applications are running well below last year’s levels.
  • Home purchases are increasingly made with cash.
  • Existing home inventories are rising relative to 2023.

 

 

Market Data

 

  • Here is a look at US equity ownership by market participant.

 

 

  • The equity market is ignoring the recent sharp repricing in Fed rate cut expectations.

 

 

  • Goldman says the S&P 500 will end the year roughly where it is now.

 

 

  • BofA’s bullish signals are at a 30-month high, implying an almost synchronized global growth upturn.

 

Source: BofA Global Research

  • The number of bearish US investors has dwindled

 

 

  • Goldman sees share buybacks driving demand for stocks this year, …

 

Source: Goldman Sachs; @WallStJesus

 

  • … as CEO confidence improves.

 

 

  • Concentration risks remain extreme.

 

Source: Truist Advisory Services

 

  • Bloomberg’s broad commodity index is above its 200-day moving average.

 

 

  • Brent crude breached $90/bbl amid geopolitical tensions.

 

 

  • Rising liquidity (boosted by higher bank reserves at the Fed) has been a tailwind for stocks.

 

Source: Oxford Economics

 

  • But that support is expected to end this quarter.

 

 

Great Quotes

 

“Old age comes at a bad time.” (Ed Sullivan)

 

Picture of the Week

 

Spring in Jutland, Denmark

 

 

 

All content is the opinion of Brian Decker