Jim Welsh's Contributions

Technical Review

FOMC Dials Back Rate Cuts

June 18, 2024

In the June 3 WTR I thought the Summary of Economic Projections for GDP, Unemployment Rate, and PCE inflation wouldn’t change much and that the yearend target rate for the Funds rate would be increased from the March SEP’s 4.6% “The FOMC updates its Summary of Economic Projections (SEP) every 3...

Technical Review

Headlines and the Devil in the Details

June 11, 2024

The headline proclaimed that 272,000 jobs were created in May which was 50% higher than the forecast gain of 180,000. Wages grew 0.4% in May and were up 4.1% from last year. The increase in the Unemployment Rate from 3.9% to 4.0% was easily dismissed in the face of stronger job growth. A look...

Technical Review

The Economy Is Slowing

June 4, 2024

The second estimate for first quarter GDP was revised down from 1.6% to 1.3%. As in the first report GDP was held down by an increase in imports (-0.9%) and decrease in inventories (-0.5%). As I’ve discussed imports reflect demand that is satisfied by production overseas, which is why it is...

Global Economic Report

Be Careful What You Wish For

June 3, 2024

Wall Street has been obsessed with guessing when the FOMC will lower the Funds rate for the first time and the number of times in 2024. It’s been an instructive process. In December many on Wall Street forecast the FOMC would make the first rate cut at the March...

Technical Review

A Top in the S&P 500 Is Approaching

May 29, 2024

Many FOMC members have given speeches or interviews since the last FOMC meeting and the message has been fairly uniform. Paraphrasing: ‘ We’re not ready to cut the Funds rate until we have more confidence inflation will return to 2.0%, nor do we think there will be a need to increase the Funds...

Technical Review

Lower CPI Won’t Alter FOMC Policy

May 21, 2024

In last week’s WTR I reviewed why the April CPI was expected to show a decline in annual inflation and spur rallies in the S&P 500, Gold, Treasury bond prices, and a decline in the Dollar.

Technical Review

Data Has Delivered Negative Surprises

May 14, 2024

Wall Street is convinced that the economy will strengthen in the second half of 2024 and enable earnings to grow by more than 10% in 2024. The increase in confidence is doubling interesting since recent data has consistently been weaker than forecast.

The Citi Economic Surprise Index (...

Technical Review

The Economy Is Slowing

May 7, 2024

The FOMC meeting and Chair Powell’s press conference overshadowed economic data last week. Going into the FOMC meeting Wall Street was concerned that after 3 months of not good inflation data the FOMC might consider a rate hike, rather than numerous cuts in 2024. The idea that the FOMC would...

Global Economic Report

Rate Cuts in 2024 Postponed

May 1, 2024

In the April Macro Tides I reviewed previous statements Chair Powell had made in speeches and during his post FOMC meeting press conferences and highlighted the emphasis he placed on the importance of confidence. “In speeches, testimony before Congress,...

Technical Review

GDP Strength and Sticky PCE Inflation

April 30, 2024

GDP growth slowed in the first quarter to 1.6% down from 2.4% in the fourth quarter and a strong 4.9% in the third quarter. On the surface it looked like the economy had decelerated far more than expectations, but a closer look revealed that inventories (-0.3%) and imports (-0.9%) suppressed...

Technical Review

Good News Is Not Good Anymore

April 23, 2024

In the second half of 2023 the correlation with the Federal Funds Rate futures (blue line inverted to align with changes in the S&P 500) and the S&P 500 was high. The S&P 500 bottomed in October as the prospect for rate cuts increased (blue line). The S&P 500 marched higher in...

Technical Review

CPI Jumps as Expected

April 16, 2024

As I discussed in the April Macro Tides and last week’s WTR, the March CPI was expected to move the financial markets. “ The Consumer Prices Index (CPI) for March will be announced on Wednesday and the Producer Prices Index (PPI) on Thursday. The CPI and PPI were up in January and February, so...

Technical Review

Job Growth Eclipses and Dims Rate Cut Optimism

April 9, 2024

The Labor Department reported an increase of 303,000 jobs in March which was well above the Wall Street’s estimate of 200,000. Other aspects of the report were improved with the average work week ticking up to 34.4 hours from 34.3, and the Unemployment Rate falling to 3.8% from 3.9% in February...

Technical Review

‘There’s Still No Rush’

April 2, 2024

On March 27 Fed Governor Chris Waller gave a speech to the Economic Club of New York entitled ‘ There’s Still No Rush’ . Governor Waller discussed how strong the labor market continues to be, the resilience of the economy, and recent disappointing inflation data as justification for waiting...

Global Economic Report

Labor Market Trends

April 1, 2024

The evolution of rate cut enthusiasm in 2024 is an example of investors anticipating what will happen only to be proven wrong. The irony is that professionals on Wall Street frequently cite the Federal Funds rate futures as a basis for their outlook for monetary...

Technical Review

FOMC – SEP vs. the Dots

March 26, 2024

I thought that the Median projection for rate cuts in 2024 would fall from 3 to 2. It turns out I was only about half right. In the March Summary of Economic Projections (SEP), the Median estimate for the Funds rate at the end of 2024 was 4.6% and no different than the December SEP. This is why...

Technical Review

Focus on the FOMC

March 19, 2024

Coming into this year Wall Street expected the FOMC to lower the Funds rate 6-7 times even though the Unemployment Rate was near a 50 year low and GDP averaged 3.1% in 2023. This was clearly not going to happen. The disappointment of fewer rate cuts was replaced by the prospect of Artificial...

Technical Review

Key Reversals in Key Stocks and Market Averages

March 11, 2024

In last week’s WTR I reviewed a number of economic reports which showed a softening in the economy, CNN’s Fear & Greed index showing investment sentiment had entered the Extreme Greed Zone, and Warren Buffet’s view that “ markets now exhibit far more casino-like behavior than they did when...