U.S. Economic Data Supports the Market

July 18, 2016

U.S. Economic Data Supports the Market Photo

Despite all of the political, geo-political and social tumult in the news recently, U.S. economic data has remained surprisingly robust. Stronger economic data has been one of the components in the recent rally in U.S. equities.

First, U.S. assets are in demand from global investors. This can be seen from the strong demand for long U.S. Treasury bonds at the most recent auction. Global investors are looking for a safe haven from global uncertainty and the U.S. is the safest place to invest money.

Second, central bank policy is being accommodative. Any action by the Federal Reserve (Fed) is now most likely on hold, versus the at least one or two tightenings expected prior to year-end only two months ago. The Bank of England and European Central Bank will continue to be accommodative to deal with the aftershocks of the Brexit vote. The Bank of Japan is now openly talking about some form of helicopter money -- an action where central banks directly finance budget stimulus through programs -- in its next round of stimulus.

The third factor is better-than-expected U.S. economic data. The recent employment data and manufacturing reports continue to show that U.S. growth remains consistent in the 2.0-2.5% range.

In this environment, the path of least resistance is for equities to continue to grind higher over the coming months. Watch for any change in the above factors to halt the rally in equities.

Tags: Monday Morning O'Malley | Stocks | U.S. economy | Federal Reserve | Fed tightening | Safe havens | Central banks

< Go to Monday Morning O'Malley

This blog post is for informational use only. The views expressed are those of the author, Dave O’Malley, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.

Subscribe to Our Publications