Camelot Portfolios Talking Points

 

 The Feds Labor Market View

Over the years, the Federal Reserve has been initializing dynamic ways to assess the United States economy. Primary indicators like unemployment rate, GDP, and inflation rate are still excellent indicators to quantify a broad picture, but the increased need for models by the fed has paved the way for more robust indicators. In 2014, the Fed created the Labor Market Conditions Index to summarize multiple correlated indicators into one model. Currently, the model indicates low to no growth in 2016. 

According to the Washington Post, this is one of Janet Yellen’s primary indicators on whether or not to raise interest rates (O'Brien). If we go by this assessment, it is difficult to see a rate hike in November or December if labor conditions continue to be below normal. Many analysts still believe there will be a rate hike in December (Robb). Other indicators and some Fed Governors are voicing their view to a hike as well. 

 

Modest Gains in GDP and Housing Formations

In the final week of October, the Bureau of Economic Analyst released 3rd quarter GDP growth. The overall economic growth expanded at an annualize rate of 2.9% (US Bureau of Economic Analyst). The largest contributor to 3rd quarter growth were consumers which contributed 1.47 percentage points (Economics). This is a telling sign considering consumers tend be a net detractor to 3rd quarter growth (Economics). Other positive contributors were increased growth in federal government spending adding .09 percentage points (US Bureau of Economic Analyst). Revisions to this initial growth rate will be issued in the coming weeks, but strong quarterly growth is a satisfactory sign on the outlook for the United States.

The other major economic news published last week was another strong month in new housing sales. In September, there were 593,000 sales of new single family homes. This is an increase of 29.8% compared to last year’s September sales (US Census Bureau). Regional home sales continue to be strong in the South and West regions. Along with the increase in sales, prices have continued to creep higher. The median house price in September was selling for $313,000, which is still in line with last year’s median price in September (US Census Bureau). We are continuing to see a rise in new home sales, but it is still well under the 1990-2008 levels. 

Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Sarah Berndt, Portfolio Manager

Eric Kartman, Research

Drew Steinman, CPA, Trader/Research

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-

References

Economics, Trading. Trading Economics. Aug 2016. Aug 2016.

O'Brien, Matt. Janet Yellen said to pay attention to this chart. So why isn’t she? 8 June 2016. 2016.

Robb, Greg. Fed expected to tee up December interest-rate hike. 2 Nov 2016. 2016.

US Bureau of Economic Analyst. Press Release. 2016. 2016.

US Census Bureau. New Residential Sales. September 2016. 2016.

 

Disclosure

The materials presented is for use by professional advisors only.  It is not intended as informational and educational, and is not intended to be interpreted as investment advice.  The references to specific investment ideas, be they concepts, trends, sectors or even specific securities, are not recommendations for any advisor to adopt for any of their clients.  No investor or client reading these materials should view them as investment advice.  These materials are to be utilized as a catalyst for thought and discussion regarding the economy, investments, and responsible investing in general.  Past performance is not necessarily indicative of future returns, and there is no guarantee that any information presented herein will contribute to a profitable portfolio.  All facts referenced herein are derived from sources believed to be reliable.  A293