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Gold Shimmers in the Face of Fed Tightening

By Mark Heppenstall | November 9, 2017

After five years of disappointing returns, this year’s double-digit gains in gold prices have surprised many investors, especially in light of the Federal Reserve’s (Fed) continued monetary policy tightening. Conventional wisdom held that as the Fed hiked short-term interest rates, the higher opportunity cost to own gold would put additional downward pressure on prices.

Critical Week for Bonds

By David O'Malley | October 30, 2017

This week is a critical week for the bond market as 10-year Treasuries yields are trading above the 2.4% level that has been cited by Bill Gross of Janus as signaling a bear market. This sentiment was reinforced by Jeffrey Gundlach of DoubleLine’s comments when he called this “the moment of truth” for bonds. During the week, several key factors could significantly impact the near term movement of yields.

A Quick Guide to the Fed Chair Nominees

By John Swarr | October 26, 2017

This week’s Monday Morning O’Malley highlighted the upcoming selection of the next Federal Reserve (Fed) chair. The top candidates for the nomination include Jerome Powell, John Taylor, Janet Yellen, Kevin Warsh, and Gary Cohn. The Chart of the Week shows recent betting odds on who will receive the nomination. While the odds are fun to talk about, this week’s write-up covers the candidates’ viewpoints and policy stances so the risks behind the candidates can be anticipated. Investors should be prepared for any outcome by understanding how each candidate would lead the Fed on key issues including monetary policy, the balance sheet, transparency, and regulation.

And the Next Fed Chair is?

By David O'Malley | October 23, 2017

Stocks rallied and bond yields rose last week on optimism for the Republicans to successfully pass tax reform and on strength in third quarter corporate earnings. These two factors will probably continue to move markets in the coming week.

Inflation Data Disappoints

By David O'Malley | October 16, 2017

The Consumer Price Index (CPI) increased by 0.5% for the month of September but was lower than expected. Despite a tight labor market, strong economic conditions and increasing commodity prices, inflation has remained lower than expected throughout 2017. Further, CPI has been lower than its expectations in six of the last seven months.

Mortgage Opportunities After Quantitative Easing?

By Jen Ripper | September 28, 2017

Nearly ten years ago, the Federal Reserve (Fed) embarked upon what became known as quantitative easing as a way to combat the financial crisis of 2008. With the Fed Funds rate near zero percent, the Fed announced it would purchase U.S. Treasury notes and mortgage-backed securities. After three rounds of quantitative easing, the Fed ended its purchases in late 2014. During that time, the Fed has purchased nearly $1.78 trillion of agency mortgage-backed securities (MBS).

Fed Continues Hawkish Tone

By David O'Malley | September 25, 2017

The stock market held near record levels and interest rates were stable after the Federal Reserve (Fed) announced its much anticipated plan to shrink its balance sheet last week. Despite concerns about the impact of Fed interest rate increases on the long term economy and inflation outlook, the Fed took a constructive view of the dynamics impacting the economy. As a result of the relatively hawkish tone, the odds of a December rate hike increased. I still believe the Fed will hold off on increasing rates until 2018.

Stocks Make a New High

By David O'Malley | September 18, 2017

The S&P 500 closed above the 2,500 mark for the first time on Friday. The markets ended a strong week of gains driven by continued favorable conditions for economic growth and the prospects for potentially bipartisan action coming out of Washington.

I’m not an Economist, But…

By Scott Ellis | September 14, 2017

I am certainly not an economist, but when a Barron’s article early in September highlighted an obscure but potentially troubling economic data point, I had to find out more. The Federal Reserve Bank of Philadelphia produces monthly coincident indexes for each of the 50 U.S. states. These monthly indexes describe recent trends and are further combined into a diffusion index value. More specifically, these indexes focus on four state-level indicators to summarize current economic conditions. The variables in this coincident index include nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average) – per the Philadelphia Fed’s website.

Unexpectedly Weak Employment Report

By David O'Malley | September 5, 2017

The nuclear test by North Korea has brought geopolitical uncertainty to a new level. As I have previously written, it is very hard to trade geopolitical risk so I prefer to stay focused on fundamentals.

Last week’s August employment report was weaker than expectations on almost all aspects. The report comes after stronger employment data earlier in the week. The ramifications of the weaker report bring the odds of a December interest rate increase by the Federal Reserve (Fed) to less than 50/50. The weaker average hourly earnings and sluggish inflation data may keep the Fed on hold until after the holiday spending season.



Disclosure Statement

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.

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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.

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