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Wednesday, September 30, 2015

The ADP Employment numbers were released today showing that private companies added 200K new jobs in September. Beating the 190K estimates, this solid 200k mark was driven by large companies overcoming the impacts of a strong U.S. dollar and weak global demand. This report comes just two days before the larger nonfarm payroll and employment reports are released. Keep an eye out on Friday for further evidence of a tight labor market that warrants a rate hike. Meanwhile, the Advance Report: U.S. International Trade in Goods, a new report from U.S. Department of Commerce, showed a widening trade deficit to -$67.2 billion for August as exports dropped and imports surged.  Please review pages 59 and 60 of the Voya Global Perspectives book for a comprehensive look at the labor market in recent years. .

Tuesday, September 29, 2015

It looks like the consumer is in a virtuous cycle and it shows with a surge in consumer confidence in September to 103 defying expectations of a drop from last month’s rise. Yesterday’s numbers also bolstered this view of a resurgent consumer with the August Personal Consumption Expenditure beating expectations, up .4% last month and 3.5% over last year, along with a healthy Personal Income rise of 0.3%. Meanwhile, housing prices rose 5% year over year in the last 12 months through July according to the Case Shiller index with every city in the survey notching gains. Please see consumer data in Voya Global Perspectives on page 13.

Friday, September 25, 2015

The U.S. GDP Q2 number was revised from 3.7 percent to 3.9 percent, beating expectations and showing that the U.S. economy had grown faster than expected. This robust GDP number was mainly attributed to high construction spending as well as increased consumer spending in areas such as health care and transportation. 2015 has been a resilient year for GDP; Q1 GDP rebounded from a -.7 revision to a final positive .6 and Q2 GDP has been steadily increasing with each revision. The healthy GDP data may finally be the last piece of evidence to prove the U.S. economy is strong enough to handle an interest rate increase. Federal Reserve Chief Janet Yellen seems to agree with this point where last night she noted in a speech that prospects for the U.S. economy appear solid and many FOMC participants, including herself, anticipate an increase in the federal funds rate later this year. Please review page 66 of the Voya Global Perspectives™ Book for an extended look at GDP in recent years.

Wednesday, September 23, 2015

The European Central Bank (ECB) met today under increased expectation and ECB president Mario Draghi delivered a message saying “we would not hesitate to act” to prevent inflation from dropping further. Well, there was a time when Central Banks would set off global market rallies, but no more. It didn’t work today and it didn’t work last week at the FOMC meeting. Yes, U.S. Federal Reserve Chair Janet Yellen was probably within her mandate to not raise rates due to non-existent inflation but that is not the point. The point is that she continually telegraphed for the past year and accentuated during the June meeting that it would be sooner rather than later, implying a September liftoff for rates. This would finally get the markets off of unconventional monetary policy and in particular ZIRP (zero interest rate policy). Low inflation is not a new phenomenon but when it came time to act she equivocated and couldn’t pull the trigger. It was the same with winding down QE – very difficult but Janet Yellen did it and the market responded positively. I believe this time she blew it and has impinged on her credibility as voted by the market when it summarily swooned. So what now if Central Banks can’t move the markets? Always go back to the fundamentals, corporate earnings being one of the best barometers. Please see “Fundamentals Drive the Markets” on page 6 of the Voya Global Perspectives™ book.

Tuesday, September 22, 2015

Second quarter earnings growth varied widely by sector. Healthcare earnings grew 15.3% year over year while energy companies’ earnings were down a whopping 55.5%. With such a wide dispersion in company performance, heightened market volatility and scarce growth, stock picking becomes more significant than in an environment where a high tide is floating all boats. Active managers skilled in stock selection will ferret out the opportunities but be prepared for even more volatility especially in light of the mixed message by the Fed last week. The Fed essentially added global markets to their mandate and this has left investors more confused than ever as to when rates will finally be raised. Please follow the VIX, a measure of market volatility on page 25 of the Voya Global Perspectives™ Book.

Friday, September 18, 2015

Federal Reserve Chair Janet Yellen held off raising rates Thursday citing uncertainty abroad as the main factor. Yellen stated recent turbulence among various foreign economies, specifically China’s growth decline and falling commodity prices, has altered the Fed’s outlook. Despite the Fed choosing not to hike rates at the September meeting Yellen did go on to highlight the current strength of the U.S. economy saying wages will rise and inflation will inevitably return to the 2 percent goal as the already strong labor market tightens even more. Yellen continued to state the Fed expects to increase rates later this year and that even October is a possibility however analysts across the board are calling this bluff as odds of a rate hike at the October meeting are around 20 percent. The Fed Chair is likely to remain ever cautious until the December meeting where a rate hike will become a real possibility. Please review the Voya Global Perspectives™ September Market Update for a look at the factors that influenced the Federal Reserve’s decision.

Thursday, September 17, 2015

Fed Chair Yellen: To raise or not to raise? That is the question: Whether ‘tis nobler in the mind to suffer the slings and arrows of the market and “Raise Rates” or to risk a sea of troubles and “Not Raise Rates". Yes, I agree a little too Shakespearean but that is how the media is portraying this melodrama. The Fed has a pristine record in communicating their path as market friendly even when it was hawkish with the methodical ending of QE. This will be no different. If the Fed raises rates today it will likely dramatically lower the path of future rate increases using Fed Board’s future expectation of Fed Funds rates. If the Fed doesn’t raise rates, markets may be initially mollified but it may signal that the outlook is not good. Either way, expect more drama than Trump’s republican presidential debate.

Wednesday, September 16, 2015

A record M&A deal between two mega-companies is in the works. This deal worth in excess of $75 billion proves that there is an appetite for risk in the market as well as that the recent market volatility is not derailing strategic deals. Meanwhile CPI was released today just hours ahead of the Fed’s two day September meeting and revealed that inflation had fallen for the first time this year. The cost of consumer goods was down .1 percent for the month and remained essentially flat at .2 percent for the year. Please review page 56 of the Voya Global Perspectives™ book for an in-depth look at inflation in 2015.

Tuesday, September 15, 2015

Consumers spent $447.7 billion in August, a new all-time record high or 0.2% over the prior month which was revised higher to 0.7%. That is why we call consumer’s the game changer. What are they buying? Autos in a big way on lower gas prices that truly have convinced consumers that low prices will remain for the near future. We think low gas prices are here to stay, but that is another story. Meanwhile, mixed data with New York Empire Manufacturing stayed at low levels seen the month before for an August reading of -14.7. Please see Voya Global Perspectives page 13 Consumer as Game Changer.

Friday, September 11, 2015

The Producer Price Index was released today showing that U.S. wholesale prices remained unchanged for August and down .8 percent year over year. Excluding food and energy, core producer prices narrowly jumped .3 percent which we continue to view these exclusions of the markdown of energy prices with a jaundiced eye. Meanwhile, University of Michigan sentiment index plunged to 85.7 in September from 91.9 in August. Please review page 64 of the Voya Global Perspectives Book for a look at the recent history of inflation.


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