Clarksville, TN – There was a ton of economic data, most of it consistent with moderately strong growth in the near term. Nonfarm payrolls rose in line with expectations in November.
The unemployment rate fell to 4.6% (the lowest since August 2007), but that was partly due to a drop in labor force participation. Average hourly earnings fell 0.1%, following a 0.4% rise in October, up 2.5% y/y (still trending higher, but more moderately than it appeared a month ago).Real GDP rose at a 3.2% annual rate in the second estimate for 3Q16 (vs. +2.9% in the advance estimate), reflecting an upward revision to consumer spending growth (note that a third of 3Q16 GDP growth was due to a surge in soybean exports).
The ISM Manufacturing Index was a bit stronger than anticipated (still relatively lackluster). The Conference Board’s Consumer Confidence Index improved.
The financial markets continued to look beyond the economic data to the outlook for 2017 (the Trump trade – lower tax rates, reduced regulation, higher bond yields). However, investors struggled to assess how much is already factored in.
Next week, the economic calendar thins out. The ISM Non-Manufacturing Index has some potential to surprise. The October trade data should show a pullback in soybean exports (which added nearly a full percentage point to 3Q16 GDP growth – hence, an expected drag on 4Q16 GDP growth). Italy votes on its constitutional referendum on Sunday.
Some see this as a possible step in the breakup of the European Union, but that may be a stretch. Prime Minister Renzi has indicated that he will resign if the “no” campaign wins. A “yes” vote would streamline the government, making it easier to get things done, such as dealing with the country’s banking crisis. “No” had been leading in the polls, but for the most part, a “no” victory should be factored into the markets.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.2591||1.495|
|Dollars per Euro||1.066||1.062|
|Japanese Yen per Dollar||114.10||123.24|
|Canadian Dollars per Dollar||1.332||1.334|
|Mexican Peso per Dollar||20.779||16.565|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||3.95||2.66|
|December 4||—||Italian Constitutional Referendum|
|December 5||—||ISM Non-Manufacturing Index (November)|
|December 6||—||Trade Balance (October)|
|December 8||—||ECB Policy Decision|
|December 14||—||FOMC Policy Decision (Yellen press conference)|
|—||Producer Price Index (November)|
|—||Industrial Production (November)|
|—||FOMC Policy Decision|
|—||Fed Revised Economic Projections|
|—||Yellen press conference|
|January 2||—||New Year’s Holiday (markets closed)|
|January 6||—||Employment Report (December)|
|January 20||—||Inauguration Day|
|February 1||—||FOMC Policy Decision (no press conference)|
|March 15||—||FOMC Policy Decision (Yellen press conference)|
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Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business December 1st, 2016.