Dovish Powell and Strong Jobs Report

February 6, 2023

 Dovish Powell and Strong Jobs Report Photo

Last week offered some impactful economic news, as we continue to see tremendous volatility in financial markets. On Wednesday, the Federal Reserve (Fed) raised rates by 25 basis points, as expected.1 Fed Chairman Jerome Powell stated that the “The disinflation process has started” and he did not push back the market pricing of two rate cuts during the second half of the year.2 The market took this as a green light to "buy everything” and rallied sharply. A quick return to slower growth and a lower-inflation environment quickly became the theme.

On Friday, the red-hot jobs report revealed an increase of 517K for January, while the unemployment rate reached a 50-year low.3 Average weekly hours also increased. This report and the Services PMI for January both show strong momentum in the economy, indicating that the weak economic data in December was likely an outlier and mainly caused by the extreme cold weather.4

The economic calendar is fairly light this week, with the main event being Powell’s speech at The Economic Club of Washington, D.C., on Tuesday.5 It will be interesting to see if he turns hawkish after the very strong jobs report.

 

Sources:

1Source: Central Banking- Fed Slows Tightening Cycle Again With 25bp Rate Rise; 2/1/23

2Source: Fortune- Markets Rally on Dovish Powell Remarks as He Thinks ‘the disinflationary process has started’; 2/2/23

3Source: CNBC- January’s U.S. Jobs Reports was Stunningly Good; 2/5/23

4Source: Trading Economics- United States Services PMI; as of 2/6/23

5Source: MarketWatch- U.S. Economic Calendar; as of 2/6/23

< Go to Monday Morning Perspectives

This blog post is for informational use only. The views expressed are those of the author(s), 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