Last week, as banking stress receded, markets calmed down. The S&P 500 Index finished the week up 3.5%1 while the U.S. 10-year Treasury rate increased slightly, by nine basis points.2 There are also signs that the banking system is stabilizing. The combined balance of the two Federal Reserve (Fed) short-term lending facilities has declined by $11 billion.3 Although money continues flowing from bank deposits to money market funds, the pace has slowed down. Friday marked the end of the first quarter and it was certainly a memorable one.
On the economic data side, we have received the final estimation of gross domestic product (GDP) growth for 4Q 2022, proving the economy was still growing at a healthy pace of 2.6%.4 Additionally, the fact that The Conference Board Consumer Confidence Index rose in March shows that consumers have not been fazed much yet by the banking stress.5 Meanwhile, both the Personal Consumption Expenditures (PCE) data from the U.S. and the Consumer Price Index (CPI) data from the eurozone underscore how sticky inflation is, especially in the core components, which is keeping the central banks concerned.
This week, job market insights will be front and center, with Tuesday bringing job openings data and Wednesday delivering the ADP private employment data. Additionally, on Friday, the nonfarm payroll data for March will be closely examined. A Bloomberg survey of economists has revealed a median estimate of 240,000 jobs being added.
Any signs of fatigue in the job market would add to the market pricing of recession. On the other hand, strong jobs and wage data could indicate lasting inflation and lead to further monetary policy tightening. We will also see the March ISM Report on Business data on Monday and Wednesday. Another data release to be watched will be the U.S. trade balance, a component of GDP, on Wednesday. Last but not least, three speakers from the Fed are scheduled to be on the docket, with their comments likely to draw close attention.6
1CNBC – Stocks close higher Friday, Nasdaq notches best quarter since 2020; 3/31/2023
2MarketWatch – U.S. 10 Year Treasury Note; as of 3/31/2023
3Board of Governors of the Federal Reserve System – Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks; 3/30/2023
4Bureau of Economic Analysis – Gross Domestic Product Q4 2022; 3/30/2023
5The Conference Board – U.S. Consumer Confidence; 3/28/2023
6MarketWatch – U.S. Economic Calendar; as of 4/3/2023
< 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.