Wealth Management Review and Outlook

"September’s month-end spike in Treasury yields was certainly dramatic and is covered in length elsewhere in this update. The longer-term setup for the move deserves attention, however..."

"August was bookended by two very different jobs reports that ultimately did little to change the prevailing “low-fire, low-hire” narrative. July’s labor report was bad, with a net loss of 23k jobs falling well short of expectations for a gain of +82k, coupled with significant downwards revisions..."

"The past month brought a suite of positive inflation releases. Inflation was expected to have improved in the month of June, and releases met or exceeded expectations. Falling energy prices during what proved to be a temporary lull in Iran hostilities were the main driver, but there were some interesting details as well; in particular, CPI inflation saw an unexpected drop in rental costs, and wireless phone services were one of the larger detractors..."

"The signing of a Memorandum of Understanding with Iran on June 17th may leave a lot of questions unsettled, and in the weeks since it has mostly held although tensions in the Middle East remain high and periodic flare-ups have occurred. But it provides the basis for a more stable ceasefire, and for negotiations toward a lasting peace..."

"May was a volatile month for Treasuries, with the 10Yr peaking at 4.68% and the 30Yr hitting its highest level since 2007, at 5.30%, before receding by month-end. Yields soared globally after a Japanese wholesale inflation report came in significantly hotter than expected, +2.3% on the month vs. +0.8%, on surging oil and commodity prices. Japan is the largest foreign holder of U.S. Treasuries, and the prospect of potential higher domestic yields changed the breakeven for holding overseas bonds, pressuring sovereign yields worldwide. .."

"April’s inflation data began to show the impact of the war in Iran, though so far it is narrowly contained. CPI was in-line at +0.9%, the highest reading since Covid, though encouragingly expectations fell as we got closer to the release, and core inflation came in a tenth lower at +0.2%. There is evidence of (very limited) consumer pullback in the most discretionary of categories.."

"While the war in Iran clouds the economic outlook, data released in March continues to support our view that the market has been worried about the wrong side of the Fed’s dual mandate..."

"For some time now our view has been that the labor markets are somewhat stronger and progress lowering inflation is somewhat weaker than the market consensus holds. Nothing has fundamentally changed this view, but quite a lot happened in February that we think deserves attention..."

"Most of the interesting market news from January might be best described as changes to the market backdrop, rather than foreground action. While a lot of it may not have been immediately market moving, we believe some of these events will play out in important ways as the year goes on..."

"December’s FOMC meeting offered plenty for market participants to digest despite none of the main elements being surprising. For one, both the statement and Chairman Powell’s press conference made it clear the Fed now expects to be on hold for at least several months..."