Summary for the 9th of April 2019


The Federal Reserve has recently signaled that due to the muted inflation growth, it would like to wait and see how the economy evolves before rising the target rate. It has also signaled that it will let the inflation rate grow higher than the objective rate of 2% before rising the target rate. With weaker outlook in the economic growth, and inflation near target level, another rate hike is less likely in this economic cycle.

The risk of a recession in the US economy has been high due to many companies have high corporate debt, and corporate earnings that are just enough to cover the cost of debt. Now that the Fed has signaled an unchanged target rate, the cost of debt will be less than previously expected, and the probability of a recession has lessened.

Economic indicators from the Eurozone (new orders, capacity utilization and corporate earnings) have showed that the declining economic growth has persisted since autumn 2018, longer than what the market has expected. A rate hike from the ECB will also be less likely in the next two years.

Indices for 9th of April.  Dow Jones Industrial Average declined by 0.3% yesterday due to the fall in stock price of Boeing while the other US stock indexes rose due to, among other factors, the rising oil price.

Dow: -0.3% (8th of April)
S&P 500: +0.1% (8th of April)
Nasdaq: +0.2% (8th  of April)
Nikkei: +0.1% (9th of April)
Chinese indices: +0.7% (9th of April)
STOXX Europe 600 Index: -0.47% (9th of April)

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