Treasury yields steady following new issuance, ahead of Fed meeting. Treasury yields are little changed this morning following an $81 billion round of two-year and five-year note issuance that pushed the short-term rates up four basis points from Friday’s close but saw healthy demand. Investors will now see how well the market absorbs an additional $78 billion of seven-year notes this afternoon as the Federal Reserve (Fed) kicks off its two-day monetary policy meeting (details below).
Economic impact of recent government shutdown. The Congressional Budget Office estimates the economic impact to be ~$5 billion, while S&P pegs the number closer to $10 billion; however, given the U.S. economy is ~$20 trillion, the overall economic impact of the recent shutdown is expected to take ~0.1-0.2% off annualized gross domestic product. So while the longest government shutdown on record has meaningfully impacted furloughed government workers and their families, which is important, the overall impact to the economy borders on negligible.
Fed pause and the yield curve. As the Fed begins its first monetary policy meeting of 2019 today, no rate hike is expected, but investors will be listening intently to comments from Chairman Powell, who will now hold a press conference after every meeting. Investors have increasingly positioned for a pause in its rate-hike campaign, which could portend a shift in fixed income markets. On the LPL Research blog, due out later today, we’ll outline how Fed policy has contributed to the yield curve’s historic flattening, and provide our thoughts on how this trend could reverse itself if the Fed slows/stops tightening.
NEW Market Signals Podcast. In this week’s Market Signals podcast, LPL chief investment strategist John Lynch and senior market strategist Ryan Detrick focus on the S&P 500 Index bounce, the end of the government shutdown, and another potential rate hike. Subscribe to the free Market Signals podcast series on iTunes, Google Play, Spotify, or wherever you get your podcasts!
- ADP Employment Report (Jan)
- GDP Report (QoQ, Q4 2018)
- Pending Home Sales (MoM, Dec)
- Federal Reserve Rate Decision (N/A)
- Japan Consumer Confidence Index (Jan)
- Eurozone Consumer Confidence (Jan)
- Germany CPI Report (Preliminary, Jan)
- Japan Industrial Production (Preliminary, Dec)
- China Non-Manufacturing PMI (Jan)
- China Manufacturing PMI (Jan)
- Employment Cost Index (QoQ, Q4 2018)
- Personal Income (MoM, Dec)
- Personal Spending (MoM, Dec)
- Core PCE (YoY, Dec)
- Eurozone GDP Report (Q4 2018)
- Japan Jobless Rate (Dec)
- Nikkei Japan Manufacturing PMI (Jan)
- Nonfarm Payrolls Report (Jan)
- Markit US Manufacturing PMI (Jan)
- ISM Manufacturing PMI (Jan)
- Markit Eurozone Manufacturing PMI (Jan)
- Eurozone CPI Report (Jan)
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.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.
All performance referenced is historical and is no guarantee of future results.
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.
Index data obtained via FactSet
For Public Use – Tracking #1-816509 (Exp. 01/20)