- The Federal Reserve (Fed) meeting starts today. The Federal Open Market Committee’s latest meeting begins today, and a statement will be issued following the meeting at 2:00 p.m. ET tomorrow. (There will not be a post-meeting press conference or updated economic forecasts following this meeting.) Fed fund futures aren’t completely discounting the possibility of a rate hike tomorrow, putting the odds at 36%; however, we believe the Fed is likely to wait until the June 12-13, 2018 meeting for their next move.
- Personal consumption expenditures (PCE) inflation nearing Fed target. The Fed’s favored measure of inflation, core PCE, was released yesterday, showing an increase of 0.2% month over month, or 1.9% year over year. This is much closer to the Fed’s 2% target than last month’s 1.6% reading, though at least some of the move was due to an easy comparison to last March (which saw PCE inflation decrease by 0.2% month over month). The moderate increase in inflation in recent months has led to a slight increase in the market’s rate hike expectations, with fed fund futures markets now evenly split between two and three more rate hikes (for a total of three or four) in 2018. This debate will go on, but it is important to remember the bigger picture–the fed funds rate at 1.75% remains low relative to history (average is 5.25% since 1971, and 3.67% since 1985) and is unlikely to cause major problems for the economy regardless of whether we get a total of three or four rate hikes this year.
- The search for income continues. The yield on the 10-year Treasury note briefly topped 3% last week, before falling back slightly. 3% is a key psychological level for the market, though it isn’t that much different than the 2.8% to upper 2.9% range it has held since early February. The recent rise in Treasury yields has also led to higher yields in other areas of the bond market, a potential benefit for those who are seeking income. We discuss the impact of the recent rise in rates for the broader bond market, and go into more detail about income-oriented sectors in this week’s Bond Market Perspectives, due out later today.
- The worst six months. As we discussed on the LPL Research blog yesterday, the dreaded “Sell in May” period kicks off today, as the S&P 500 Index historically has done worse during the next six months than any other six-month stretch–up only 1.5% on average and higher 63.2% of the time. What is important to note though is that when the S&P 500 has been above its 200-day moving average and the previous six months (the best six months of the year) are higher (like 2018), the average return jumps to 3.3% with gains 70.2% of the time.
- Markit Mfg. PMI (Apr)
- ISM Mfg. PMI (Apr)
- Nikkei Japan Svcs. PMI (Apr)
- Trade Balance (Mar)
- Markit Svcs. PMI (Apr)
- Durable Goods Orders (Mar)
- Eurozone: CPI & PPI (Mar)
- China: Caixin China Svcs. PMI (Apr)
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use – Tracking # 1-725798 (Exp. 5/19)