The Federal Reserve is intensifying its communication strategy regarding potential interest rate hikes, suggesting that an increase could occur as soon as next month. Pat Harker from the Philadelphia Fed recently remarked that, “I can easily see the possibility of two or three rate hikes over the remainder of the year.” This follows similar statements from other central bank officials, including Bill Dudley of the New York Fed, who mentioned that a tightening in the June to July timeframe seems reasonable if current forecasts hold true.
● Markit PMI indicates US manufacturing is stagnant in May | MarketWatch
● Harker sees June hike as appropriate given stronger economy | MNI
● Progress toward full employment has stalled | FedWatch
● When elections aren’t about the economy | NY Times
● Billions in US taxes may go unreported, according to a study | WaPo
Stock markets outside the US saw a surge, leading the major asset classes higher last week, according to various proxy ETFs. The Vanguard FTSE Developed Markets (VEA) recorded a total return of 0.8% for the week ending May 20, outperforming other asset classes.
● Existing home sales in the US rise by 1.7% in April | MarketWatch
● Rosengren states that the US is ‘on the verge’ of a June rate hike | Reuters
● Euro-area growth shows signs of slowing according to PMI survey | Bloomberg
● UK Treasury warns Brexit would trigger a year-long recession | BBC
● Bookmaker odds indicate the UK will remain in the EU | OCA
● Japan’s economy continues on a “moderate recovery” track | MNI
● The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism
By Arun Sundararajan
Summary via publisher (MIT Press)
Sharing isn’t a new concept. Offering a ride, hosting a guest, running errands, or joining a supper club—these activities have existed for ages. However, in the context of the “sharing economy,” the distinction lies in offering such services for monetary compensation to strangers instead of friends. In this book, Arun Sundararajan, a leading authority on the sharing economy, discusses the shift towards what he terms “crowd-based capitalism” — a novel method of organizing economic activities that could potentially replace traditional corporate models. He explores how the blending of personal and professional exchanges will influence the economy, government regulation, job definitions, and our social fabric.
Another interest rate increase may be on the horizon, as indicated by New York Fed President Bill Dudley. He stated that a tightening in the June to July timeframe is a reasonable expectation, provided his forecasts hold true. This aligns with the recent release of the Fed’s minutes from the last meeting and the April update on the real (inflation-adjusted) base money supply, which has contracted in yearly terms for three out of the last four months.
● Dudley signals a potential interest rate hike in June or July | MarketWatch
● Jobless claims settle down in mid-May | MarketWatch
● The US Leading Economic Index shows a bigger-than-expected rise in April | RTT
● Philly Fed Manufacturing Index unexpectedly declined in May | RTT
● Chicago Fed Index reveals economic growth picked up in April | Chicago Fed
● Bloomberg Consumer Comfort Index rises in mid-May | Seeking Alpha
US economic growth slowed in April, reaching a four-month low, as per the latest update of the three-month average of the Chicago Fed National Activity Index (CFNAI-MA3), which fell to -0.22, the lowest level since last December.
The US stock market continues to display a bear-market bias, persisting since last autumn. Despite equities hovering near their all-time highs, recent downward trends suggest that their ability to rally may be diminishing. A robust series of strong economic reports could dispel the bear-market fears. The current macro trend is not entirely pessimistic, as previously analyzed in the US economic profile, yet the data does not provide overwhelming encouragement either. Thus, the market remains in a state of uncertainty, awaiting convincing indicators, good or bad. Until incoming economic data shows more clarity, the bearish sentiment in equities will likely endure, especially following a lengthy bull market from 2009 to 2015.
● Fed minutes imply a rate hike is firmly on the agenda for June | Reuters
● Business inflation expectations tick up slightly to 1.9% | Atlanta Fed
● Mortgage applications fell by 1.6% last week, despite the lowest rates in a year | CNBC
● A study predicts modest economic gains from the TPP for the US | WSJ
● US ISM Survey chiefs anticipate better months ahead | MNI
The economic landscape is currently rife with mixed signals, particularly regarding interest rates and market performance. As the Federal Reserve navigates the complexities of growth and inflation, it remains essential for investors and analysts to stay informed about upcoming changes and indicators. Keeping an eye on these developments will be crucial for making smart financial decisions in the months to come.
