Review and Outlook

"December brought renewed talk of a Fed “pivot,” and growing expectations for Fed Funds rate cuts met only token resistance from Fed Chairman Jerome Powell..."

"Last month we flagged October’s Beige Book as a potential inflection point in economic activity, with the summer’s gangbuster’s growth seemingly slowing to a crawl in late September."

“As the end of the Federal Reserve’s hiking cycle approaches, the Fed Funds Rate has taken a backseat to other factors in explaining longer dated yields.”

“McCarthy failed a no-confidence vote on Tuesday evening. It remains to be seen who will replace McCarthy and the process has the potential to significantly delay the 2024 budget and increases the chances of a November shutdown.”

“The markets expected Powell’s Jackson Hole speech to represent a major policy shift, akin to 2022’s “steely resolve to beat inflation.” They were disappointed; Powell’s remarks were neutral enough that both hawks and doves came away believing he was in their camp.”

"While one month does not make a trend, July was a very good one for US economic releases and the Federal Reserve’s fight against inflation."

"While the June 14th Fed meeting gave us the “hawkish pause” the market was anticipating, investors severely underestimated the degree of hawkishness the Fed delivered."

"Washington’s debt ceiling showdown might have dominated the news in May, but it ultimately proved to be a non-event."

"Q1 GDP missed, +1.1% vs. +1.9%, yet below the surface it was a fairly strong report. After a persistent build-up over the last two years, a sizable drop in inventory levels detracted 2.26% from quarterly growth as consumption exceeded production."

"The most surprising part of the failure of Silicon Valley Bank (SVB), the largest since 2008, was that it failed for very old-fashioned reasons."