Central bank watch. Stocks are unchanged this morning as investors digest two pivotal central bank decisions. On Wednesday, the Federal Reserve (Fed) announced it would leave rates unchanged, concluding a string of three 25 basis point (0.25%) rate cuts from July to October. The European Central Bank (ECB) announced this morning in ECB President Christine Lagarde’s first meeting that it would leave monetary policy unchanged as well. The ECB acknowledged the growth outlook has improved in Europe and that downside risks have moderated, but we’d still like to see potential longer-term structural changes that could result in more coordinated fiscal policy.
Tying a bow on 2019. The Fed officially tied a bow on 2019 with another policy pivot. Investors expected a Fed pause after Fed Chair Jerome Powell clearly messaged the end of rate cuts at the last meeting. What was more interesting than the decision itself was policymakers’ projections for next year. Today on the LPL Research blog, we’ll highlight what we expect from the Fed in 2020 based on signals from yesterday.
More mixed economic data. There were few encouraging themes in today’s batch of economic data. Year-over-year growth in the core Producer Price Index fell to a three-year low, showing global tensions and weakening currencies are still weighing on wholesale prices. Initial jobless claims rose by 49,000 to 252,000 in the week ending December 7, the highest level since September 2017. We expect this jump in claims to reverse over the next couple of weeks due to holiday distortions.The four-week moving average for claims is still historically subdued, therefore, we’ll be watching for that average to increase before becoming concerned.
Signs of stabilization. The Organisation for Economic Co-operation and Development’s (OECD) latest global leading economic indicators provided further evidence of stabilization despite ongoing trade tensions. Europe and China have paced the recent modest uptick based on the latest OECD data, while Japan has lagged behind. The economic growth outlook for non-U.S. developed economies remains sluggish, but the trajectory is encouraging. Even though this data has caught our attention, we have no plans to change our recommended regional asset allocations at this time.
Moderating growth. November economic data reflected moderating growth as the U.S. economy continued to battle trade worries. The new Market Insight Monthly: November 2019 in Review covers what happened in the economy, global equities, fixed income, alternatives, and real assets in November.
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