The U.S. economic data last week was stronger than expected, and the risk markets continued to perform well. In my last blog post I mentioned that the ISM data and employment number were the two key pieces of economic data to watch, and both numbers came in stronger than anticipated. The February ISM number was 53.6, comfortably above the level of 50 that signifies expansion. The ISM non-manufacturing was 53.4.
The change in February payrolls was 242,000 versus an expected 190,000, and prior revisions added another 30,000. The unemployment rate remained unchanged at 4.9% as more people re-entered the workforce. Overall, I thought the data last week was strong and supports 2.5% to 3.0% Gross Domestic Product (GDP). The two primary areas of weakness in last week's data were that wages fell and productivity slowed.
I have been asked many times if the Fed will tighten in March, and I continue to believe that they will not. With inflation low and lingering global uncertainty, I believe the Fed will be on hold until at least June. It will take continued employment gains and economic expansion to get the Fed to raise rates in June.
I continue to like being short U.S. Treasuries and keeping a curve steepening bias in this environment.
< Go to Monday Morning Perspectives
This blog post is for informational use only. The views expressed are those of the author(s), 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.
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.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
