By Bill Hornbarger, Chief Investment Officer
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Three Things to Watch
- This is an important macro week, with key data points to help frame the narrative around monetary policy. On the data front, the Institute for Supply Management (ISM) manufacturing survey is expected to be above 50 for the second consecutive month, after almost two years of contraction. On Friday, the April employment report will be released, with another strong number expected. Nonfarm payrolls are expected to increase a robust 250,000, and the unemployment rate is expected unchanged at 3.8%.
- The U.S. Federal Reserve (Fed) meets this week and is widely expected to leave rates unchanged. Futures are indicating a less than 3% chance that the Fed will lower rates this week. The bigger focus will be on Fed Chairman Powell’s press conference, where we expect him to be asked about the possibility of rates being hiked. We would guess that he would answer by indicating it is possible—if the inflation data remains sticky.
- The first-quarter earnings season continues with a grab bag of high-profile releases, including Pfizer, Coke, McDonalds, and Magnificent Seven members, Amazon, and Apple. With almost half of the S&P 500 reporting to date, positive earnings surprises outnumber negative surprises by a five-to-one margin.
Three Things to Know
- The equity share of global mutual fund assets has reached a new record, per Goldman Sachs. It has increased by more than 10% the past four years and stands at roughly 75%. (Source: The Kobeissi Letter)
- U.S. debt service costs before the Fed started raising rates were roughly ~1.5% of gross domestic product (GDP). Now, the U.S. is paying ~3.1% of GDP in debt service costs as interest rates have risen. (Source: The Kobeissi Letter)
- 43% of small businesses in the U.S. were unable to fully pay their rent in April, the highest share since March 2021. Delinquencies were the largest among restaurants, with 52% becoming delinquent in April. (Source: The Kobeissi Letter)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.