Economic Update 4-22-2024
- Economic data for the week included gains in retail sales and industrial production, as well as for several regional manufacturing indicators. However, the index of leading economic indicators turned downward again, as did existing home sales and housing starts.
- Equities fell around the world last week, as higher-for-longer expectations for interest rates and geopolitical conflict in the Middle East put a damper on the mood. Bond prices also fell, being negatively impacted by the rise in rates. Commodities were mixed, with metals prices sharply up, and oil down as geopolitical tensions eased by the end of the week.
U.S. stocks fell back for the third straight week, as the mood soured over concern around rising Middle East tensions and possibly higher-for-longer interest rates. By Friday, the measured response of Israel toward Iran appeared to calm markets a bit, after initially fearing a more robust escalation. Fed chair Powell implied that inflation has indeed been stickier than expected, noted by the comment, “It’s likely to take longer than expected to achieve that confidence,” and it may take the Fed longer than expected to hit its target (which was no surprise to markets). However, this was taken as another sign that the number of cuts assumed for this year may need to be rethought. Additionally, the New York Fed president implied that higher rates could be considered “to achieve their goals” if the data warranted that, while the Atlanta Fed president indicated policymakers wouldn’t be able to cut until year-end. Markets are obviously especially sensitive to interest rate policy semantics at this point. A variety of well-watched economists/strategies have extended their timeline for the first Fed cut from June to July or even September, but not all have.