Tag: Year

Macquarie no longer sees the RBA hiking interest rates this year

Macquarie no longer sees the RBA hiking interest rates this year

Financial markets and many economists no longer see the RBA lifting interest rates in 2018.
Like financial markets and many economists before them, Macquarie Bank is the latest to push back its forecast for the RBA’s first rate increase since late 2010, seeing liftoff occur in early 2019 rather than its previous forecast for August of this year.
“The primary reason for pushing back our RBA call is that the Bank can err on the side of growing the economy faster for longer to erode spare capacity and have confidence that inflation is firmly moving back into the 2-3% target,” it says, pointing to three specific factors to explain it’s change of view.
The first of those is what’s been seen in other major advanced economies since the global financial crisis when it comes to wage pressures.
“The experience in other advanced economies in recent years is that unemployment rates can fall to low levels without much pick-up in wages growth or inflation,” it says.
Along with an expectation that wage or inflationary pressures will build significantly any time soon, it says a recent slowdown in Australia’s housing market, specifically in Sydney and Melbourne, means there is now less urgency for the RBA to act by lifting official interest rates.
“Housing has settled,” Macquarie says.
“There appears little danger at this stage of a reacceleration in housing price or credit growth.” While those factors, in Macquarie’s opinion, will see the cash rate remain at 1.5% throughout this year, it says “by early 2019 it should become apparent that growth and inflation are on a path that can afford the gradual removal of monetary policy support”.
“Given a bit more time, it is likely that private demand growth will also solidify at healthy rates.
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Stock Investors Slash Risky Bets as Bull’s 10th Year Begins

Stock Investors Slash Risky Bets as Bull’s 10th Year Begins

The bull market can’t last forever, and investors are preparing for the next bear market by raising cash and rebalancing their portfolios towards less risky holdings, The Wall Street Journal reports.
The specters of rising inflation, rising interest rates and international trade conflict threaten to put an end to the so-called Goldilocks Economy that has been propelling stock prices upward. “Until now, the expansion was seen as one that could go on and on without any signs of price inflation, and that’s being questioned now,” as Larry Hatheway, chief economist at Zurich-based asset management firm GAM Holding, which oversees $163 billion of client assets, told the Journal.
The most record high closes for the month of January had been 11, set in 1964.
The Return of Volatility However, the euphoric mood was shattered by a long overdue correction that sent the S&P 500 down by 10.2% between the closes on January 26 and February 8.
Since its all-time record high set at the close on January 26, the index is down by 3.7% as of the close on March 13.
This has unsettled many formerly complacent investors, and is a factor in the high level of worry about the securities markets among our millions of readers worldwide, as measured by the Investopedia Anxiety Index (IAI).
For example, reports of rising wages, falling unemployment, and rising GDP are sparking fears of inflationary pressures which, in turn, will raise corporate costs, cut profit margins and boost interest rates, sending stock and bond prices downward. “History suggests that S&P 500 returns can remain positive if 10-year Treasury yields rise at a monthly pace slower than 20 bp and the level of yields remains below 4%.
GAM Holding is adopting long-short strategies that seeks to gain from both rising and falling asset prices, and is buying emerging market debt to diversify, per the Journal.

Nearly half of Calif. injured workers on opioids weaned after two years: Study

Nearly half of Calif. injured workers on opioids weaned after two years: Study

A new study found that 47% of injured workers with chronic opioid use weaned off the painkillers completely within 24 months and that those who did not wean reduced their opioid dosage by an average of 52%, the Workers Compensation Insurance Rating Bureau of California announced Thursday.
The Oakland, California-based ratings agency studied its databases of medical transaction records and unit statistical reports since July 2012 to examine the cost implications of chronic opioid use and the process of weaning injured workers off opioids statewide.
The study also found that claims involving chronic opioid use cost more than nine times in physician services than the average workers comp claim and that the median time from chronic opioid use to weaning completely was eight months.
Meanwhile, the median time from accident date to when the worker was weaned off completely was 19 months.
The study also examined types of injuries treated, finding that “over 80% of transactions associated with chronic opioid claimants had primary diagnoses of soft tissue injuries.
Injured workers who weaned off were more likely to have Nature of Injury codes for Fractures, and less likely to have Unspecified Injuries than those who did not wean off.”

Trump tariffs may imperil a delicate global economic rebound

Trump tariffs may imperil a delicate global economic rebound

Over the past year, the major regions of the world finally shed the scars of a global financial crisis and grew in unison for the first time in a decade.
But President Donald Trump’s announcement Thursday that the United States would impose heavy tariffs on imported steel and aluminum — with some countries potentially exempted — suddenly raised a fear that few had anticipated: That U.S. tariffs could trigger a chain of tit-for-tat retaliation by America’s trading partners that could erupt into a full-blown trade war and possibly threaten the global economy. “Tariffs threaten to strangle the global golden goose,” said Mark Zandi, chief economist at Moody’s Analytics.
It remains far from clear how, exactly, the Trump administration’s tariffs will be applied, which countries will be subject to them or how economically damaging the retaliation from the affected nations might prove.
The president announced 25 percent tariffs on foreign steel and 10 percent tariffs on foreign aluminum.
Across the world, China, the world’s second-largest economy after the United States, is also sending ominous signals.
And the United States is enjoying a job market boom, fueled in part by the stronger global economy, rising business and consumer confidence and the sweeping tax cuts that Trump pushed through Congress.
And inflation has remained in check.
Rather, the worry is that a widening trade war with layers of retaliatory tariffs would depress global trade, which grew 4.2 percent last year, the most since 2011, on the fuel of the global economy.
If a trade war erupts, “February’s powerful jobs report could prove to be one of the last gasps of an economy that has been marked by healthy employment growth and remarkably little inflation.”

Is this the hottest job market in 35 years?

Is this the hottest job market in 35 years?

Layfield Report CEO John Layfield explains why the better-than-expected February jobs report could spell trouble for Democrats in the upcoming 2018 midterm elections.
President Trump made an election promise to create jobs for American people, and the latest jobs report indicates that he has kept his promise.
The government on Friday released its latest jobs report, which showed that the U.S. added 313,000 non-farm payrolls in the month, handily beating analysts’ consensus expectations for 200,000 new jobs in the month.
The result was so surprising that not only did it top the average forecast, it beat the most aggressive analyst forecast for 300,000 jobs.
According to U.S. Secretary of Labor Alexander Acosta, “The non-stop job creation since the election has yielded 2.9 million jobs.
For the fifth month in a row, the unemployment rate remained at 4.1%, a 17-year low.
Goods-producing industries such as manufacturing, mining and logging, and construction collectively had the highest month-to-month growth since 1998.” A stellar measure included in the reading was the fact that 806,000 Americans entered the workforce in February.
According to FOX Business’ Adam Shapiro, this was the highest reading since 1983.
Wage growth moderated after January’s lofty reading, to 2.6%, well below the 2.8% forecast and is down from 2.9% annual growth in January, easing worries about wage inflation.
The lofty measure contributed to a market sell-off that sent the Dow Jones Industrial Average and the S&P 500 into correction territory.

U.S. adds 313,000 jobs in February in biggest gain in a year and a half

U.S. adds 313,000 jobs in February in biggest gain in a year and a half

The numbers: The U.S. added 313,000 new jobs in February, the biggest gain in a year and a half and clear evidence that a strong economy has plenty of room to run.
Despite the big increase in hiring, wage growth did not keep up.
The 12-month increase in pay slipped to 2.6% from a revised 2.8% in January.
Construction companies hired 61,000 people to mark the biggest increase in 11 years.
Workers also put more time in on the job, reversing a weather-induced decline in the first month of the year.
What’s more, the economy added 54,000 more jobs in January and December than previously reported.
Altogether, the economy has gained an average of 242,000 new jobs in the past three months.
Big picture: The modest growth in wages in February is likely to tamp down, at least for awhile, Wall Street worries about rising pay leading to higher inflation.
A surge in pay in January helped ignite a route in U.S. stock markets and send interest rates higher.
Wages are almost certain to keep going up, however, especially if the economy keeps adding jobs at its current torrid pace.

Fed should start hiking rates and decide later how many moves needed this year, Kaplan says

Fed should start hiking rates and decide later how many moves needed this year, Kaplan says

The Federal Reserve should get started hiking interest rates and can decide as the year unfolds how many times to move, said Dallas Fed President Robert Kaplan on Tuesday.
“My base case…is three for this year,” Kaplan said in an interview on CNBC.
“I think we should get started sooner rather than later though, and we will see as the year unfolds whether the base case should stay at 3 or should be something more or something less,” Kaplan said.
The Fed will meet to set monetary policy on March 20-21.
Kaplan’s comments suggest he will press for a rate hike at the meeting.
The Dallas Fed president, who is not a voter this year on the central bank’s interest-rate committee, said he was worried the unemployment rate is going to get a 3-handle this year, well below levels of full employment.
The central bank now estimates full employment is around a 4.6% unemployment rate, well above the 4.1% level seen in the January unemployment report released last month.
“The reason I want to start raising the fed funds rate is I think that will give us the best chance to extend the expansion for longer,” Kaplan said.
The Fed has never been able to just tap on the brakes and keep the economy growing when the unemployment rate falls well below full employment, he said.
“The history of overshooting full employment in the United States and having a soft landing is not a long history,” he said.

Japan’s unemployment lowest in nearly 25 years

Japan’s unemployment lowest in nearly 25 years

TOKYO–Japan’s jobless rate fell to a low of almost 25 years in January, while a ratio of job openings remained at a 44-year high, the latest signs that the labor market is tightening as the world’s third-largest economy continues its growth streak.
Haruhiko Kuroda, recently nominated to a new five-year term to continue his work toward 2% inflation, has repeatedly said severe labor shortages should promote higher wages, higher spending and higher prices.
Société Générale chief Japan economist Takuji Aida expects the jobless rate to rebound to 2.6% in February after the sharp fall in January, before settling later in the year below 2.5%.
Core consumer prices in Tokyo rose at the fastest pace in nearly three years in February, a result that suggests nationwide figures to be released later in the month could show core inflation reaching 1% for the first time since August 2014, according to Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
Prices excluding fresh food in the capital rose at 0.9% in February from a year earlier, compared with January’s 0.7% rise.
In recent months, the national index has been around 0.2 percentage points higher than the Tokyo result.
Japan’s core CPI was up 0.9% in January, according to data released last month.
Capital Economics chief Japan economist Marcel Thieliant says energy inflation will remain elevated until the middle of 2018, but the boost is expected to taper off afterward, making it difficult for Mr. Kuroda to achieve his price goal. “With producer prices of consumer goods now slowing and wage growth still muted, underlying inflation is set to remain well below the Bank of Japan’s 2% target.”
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

Opinion: Seven reasons why inflation will haunt investors this year

Opinion: Seven reasons why inflation will haunt investors this year

4: Weak dollar As I guessed might happen in this column last July, the dollar continued to fall in the second half of 2017.
This trend will continue for two reasons.
A weak dollar boosts U.S. growth and therefore causes inflation, because it attracts foreign demand for U.S. goods.
That’s not the only reason a weak dollar causes inflation.
Commodities are priced in dollars.
Given the weakness of the dollar last year, this is already happening.
Producer prices are rising at about 3%-4% year over year, notes Paulsen, or much higher than the 2.1% for consumer prices.
If they don’t, it’s still bad for stocks, because they’ll take a hit in margins and earnings growth.
“The stock and bond markets are re-pricing themselves for a very different character in the economy,” says Paulsen.
He expects inflation to be a problem for stocks and bonds this year.

GOP lawmakers seek federal money for Gov. Scott Walker’s welfare limits that would cost nearly $90M a year

GOP lawmakers seek federal money for Gov. Scott Walker’s welfare limits that would cost nearly $90M a year

Scott Walker’s welfare limits even as GOP senators considered seeking federal help this week to cover more of the nearly $90 million in costs from the proposals.
In addition, Assembly Republicans will also vote separately Thursday on a five-year, $12 million pilot program to require food stamp recipients to use their benefits for healthy food.
Critics say the bills will be costly for state taxpayers to implement and less effective than using the money for programs like training for workers or public transportation to get them to jobs.
To offset some of the state costs, some Republican senators want to seek additional federal money for Food Share, the state’s food stamp program.
To respond to this, Republicans on the Senate Public Benefits Committee Wednesday amended the bill requiring parents on Food Share to work, including in it a request to the federal government to share some of the savings with the state of Wisconsin.
It’s unclear whether President Donald Trump’s administration would have the authority or willingness to do so.
An opponent of the bill said she believed that such a move would take an act of Congress.
Sherrie Tussler, executive director of Hunger Task Force of Milwaukee, said the proposal was “straight out of Dickens.”
The Assembly is voting on a companion bill to the Senate proposal that doesn’t include the request for additional federal money.
The existing Food Share work requirement — proposed by Walker in 2013 and implemented in 2015 — has led so far to about 3.5 recipients losing benefits for every one who secured a job through the program.