Jim Nabors, who played the bumbling but lovable Gomer Pyle in The Andy Griffith Show and subsequent spinoff Gomer Pyle, U.S.M.C., passed away on November 30. Inspired by a couple of Gomer Pyle’s catch phrases, this week we look at some recent strength in economic surprise indexes that hit multi-year highs in November. These new highs might have led Gomer — if he were an economist instead of a filling station attendant and then Marine Corp private — to say, “Surprise, surprise, surprise!”
Companies remained generally upbeat during the third quarter earnings season, based on the LPL Research Corporate Beige Book Barometer. This is hardly surprising, given actual earnings results were good again and estimates of future earnings held up relatively well as companies provided forward-looking guidance.
The coming week will be a busy one for central banks, with the Federal Reserve (Fed), European Central Bank (ECB), and Bank of England (BOE) all scheduled to hold policy meetings. The Bank of Japan will also meet the following week, with its statement coming on December 21. Outside of a potential Fed hike, we don’t expect much in the way of policy updates from any of these central banks.
Economic reports released in November 2017, which mostly reflect economic activity in October, largely exceeded economists’ consensus expectations with several very strong reports pointing to potential acceleration. With the help of a bounceback in economic activity disrupted by Hurricanes Harvey and Irma, October industrial production and housing data were particularly strong. November economic reports suggest an economy on a growth path modestly higher than the expansion average of 2.2% with few signs of the kind of overheating that could lead to recession.
The Portfolio Compass provides a snapshot of LPL Financial Research’s views on equity, equity sectors, fixed income, and alternative asset classes. This monthly publication illustrates our current views and will change as needed over a 3- to 12-month time horizon. Read recent issue...
Stock markets, bond markets, the economy, policy — some years they push and pull on each other lightly as markets follow their own path; in others, one influence, such as monetary policy, dominates. But sometimes, often following a period of change, understanding the pushes and pulls and how they interact becomes a key to reassessing market dynamics for the next year and beyond.
An important shift has taken place in this economic cycle. The Federal Reserve (Fed) was finally able to start following through on its projected rate hike path, raising rates twice in just over a three-month period. By doing so, the Fed showed increasing trust that the economy has largely met its dual mandate of 2% inflation and full employment, that the economy is progressively able to stand on its own two feet, and that fiscal policy may now provide the backstop to the economy that monetary policy has provided throughout the expansion.
During any presidential election, you can expect a barrage of promises from the yard sign endorsements, bumper stickers, stump speeches, and media headlines. All pledge to improve the economy, provide better education for all, and preserve the environment.
The Economic Cycle - We believe we are in the mid-to-late stage of the current expansion, but we are still seeing some early cycle and late cycle behavior. Extended loose monetary policy, inflation, and employment growth are still exhibiting early cycle behavior, while some items relating to corporate profits are showing late cycle behavior, although they may be reset if profits improve.