Fed Lowers Inflation Expectations for 2019

As a consumer you might not like to see an increase in inflation, but a moderate increase is a sign of a healthy economy. Historically, wages will increase at the same pace as prices during periods of inflation. Therefore, as an economy we like to see steady growth in inflation. But muted inflation is a cause for concern for the Fed. For quite a while now, the central bank has failed to hit its 2 percent inflation target and expectation of rise in inflation has decreased recently. The Fed officials even lowered the target to 1.5 percent in March. The U.S. Federal Reserve sees 2 percent inflation as the sweet spot for the economy. Currently, inflation is slightly below the 2 percent mark, but

Improved Housing Market

The housing market may not be flourishing like it once was, but some indicators suggest the market may be set for a rebound. Many experts are feeling optimistic going into the second half of the year. During the first half the year home sales lagged expectations, but according to bank and mortgage lenders the housing market is starting to pick back up. Despite a slow start, people are feeling more confident about buying and selling homes. Fannie Mae’s latest Home Purchase Sentiment Index data indicates record-high confidence among American consumers in the state of the housing market. Furthermore, 43 percent of the respondents also thought now was a good time to sell a home. For the first

US Labor Market and Rate Cut

Until the most recent U.S. jobs report, a rates cut in the near future seemed unlikely. However, there is now evidence for a softening job market, which may prompt the Fed to cut rates as soon as late June. The number of new U.S. jobs was 75,000 in May, which is down from an average of 164,000 per month in 2019, and average of 223,000 per month in 2018. Additionally, the amount of jobs added in the previous two months was revised by a decrease of 75,000. A large portion of this is due to abysmal construction-job generation, which is an additional indicator that the overall economy is slowing. While the report is ominous, its results aren’t inherently troublesome. It may simply be a reflectio

Late cycle signals in US

Cyclicality is one of the underlying inevitabilities of macroeconomics and, after one of the longest bull markets in U.S. history, the U.S. economy is finally showing signs that it has entered a late cycle phase. The first of these signals is one of the classic tell-tale recession indicators - an inverted yield curve. Sections of the yield curve have been inverting since November of 2018, and now the 3-month treasury bill yield has dipped below the 10-year treasury bill yield for the first time since 2007. Additionally, many European countries now have inverted yield curves and multiple countries in Asia have flat yield curves that could invert in the near future. These suggest high uncertai

U.S. Service Sector

wp:paragraph Last month the service side of the U.S. economy expanded at its best pace since February. Analysts’ estimated the non-manufacturing index (NMI) would drop to be 55.4. But according to the Institute for Supply Management (ISM), the NMI was 56.9. Topping April’s NMI of 55.5, representing a two-and-a-half-year low. Last month the index of business production climbed 1.7 points to 61.2 and index of employment rose 4.4 points to 58.1, thus, these improvements point to the underlying strength of the service sector. Service-oriented companies are optimistic, despite concerns over the shortage of skilled workers and trade tariffs. For the 112th consecutive month the non-manufacturing se

Growth in Solar Industry

As the concern over environmental pollution increases, it is no surprise that the solar industry is booming. Another key factor driving the growth of solar photovoltaic (PV) industry is the immense support the U.S. government has offered. The government increasingly keeps pushing for the adoption of solar energy by offering incentives and tax benefits for both the consumer and producers. The Energy Policy Act of 2005 established the Investment Tax Credit (ITC), which allows homeowners and businesses to deduct the cost of solar PV systems up to 50%. Because of incentives like the ITC, the number of systems being installed has significantly increased in the past decade. In 2018, the U.S. reach

A Look at Corporate Leverage

Companies in developed markets have been criticized in the past for taking on too much leverage. While it is true that the net debt to EBITDA ratios have increased and as well as the share of companies earning sub-investment grades from credit-rating agencies. Yet credit rating downgrades have not been significantly widespread; much of the change can be attributed to a shift in newly rated corporate debt. Analysis on debt shows that most of the now low-rated corporate debt either did not have a rating in 2008 or didn’t exist. Therefore, the increase of sub-investment grade bonds has an element of new companies tapping into debt markets to take advantage of an economic growth as well as a fav

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