Ride the Economic Roller Coaster

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What a roller coaster ride over the past week or so, seemingly driven by the Fed and rumblings of a trade war. First on the Fed. Seemingly good news that John Williams is the front-runner to take over the New York Fed Presidency and Rich Clarida the Vice Chairman position. Each is a bit on the more careful side of the ledger. At the March meeting, the FOMC outlook was marked upward: the unemployment rate was marked lower, the 2019 and 2020 dots were moved higher and the inflation rate was ticked to 2.1%. I read that inflation forecast as a genuflection towards the Philipps Curve oriented staff. Consider that they now anticipate the unemployment rate to move down to 3.6%, but with inflation just barely over 2% is not much of a reason to hike aggressively.

On the trade front, we had some better news. It appears that many countries will be spared from the metals tariffs. Over the weekend, Treasury Secretary and incoming-National Economic Council head Larry Kudlow said that the tariffs are open to negotiation – even for China, though problems with that country extend deeper – investment regulations, stealing intellectual property and mandated technology transfers. Thus far, China’s response has been muted – which is for the better.

As for the U.S., growth continues strong. Q4 GDP was revised up to 2.9%. ISM new orders are holding above 60, and up from 50 a year earlier. The run of February investment data, though, were strong. Durable goods orders were up 3.1% MoM vs 1.6% expected; ex transportation was up 1.2% vs 0.5% expected; non-defense cap goods were up 1.8% vs 0.9% expected; and non-defense shipments were up 1.4% vs. 0.5% expected. Non-defense cap goods shipments were up 9.8% YoY. It appears that the investment boom is just getting started.

To see how durable goods have progressed over the years, please go to page 69 of the Global Perspectives Book.

Webinar Alert: Doug will be part of the Financial Planning “Managing Volatility” webinar on March 28th from 2:00 to 3:00 pm.

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