Monthly Market Updates

Income and Spending Slow, Inflation Easing Further

• • Gross Domestic Product (1Q23): GDP Now forecast (4/5/2023) (By Atlanta Fed): Latest estimate: 1.5%
  • Employment (March): Total nonfarm payroll employment increased by 236,000 in March, and the unemployment rate changed little at 3.5% (from 3.6%). The labor force participation rate was unchanged at 4%. Employment continued to trend up in leisure and hospitality, government, professional and business services, and health care.
  • Inflation (February): The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in February on a seasonally adjusted basis, after increasing 0.5% in January. Over the last 12 months, the all items index increased 6.0% (down from 6.4%) before seasonal adjustment. The index for all items less food and energy rose 0.5% in February, after rising 0.4% in January. The all-items less food and energy index rose 5.5% over the last 12 months, its smallest 12-month increase since December 2021.
  • The Producer Price Index (PPI) (February) for final demand increased 0.1% in February, seasonally adjusted. On an unadjusted basis, the index for final demand rose 4.6% for the 12 months ended in February 2023 (vs. 6.0% for January).
  • Retail and Food Services Sales (February): Advance estimates of U.S. retail and food services sales for February 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $697.9 billion, down 0.4% (±0.5%) from the previous month, but up 5.4% (±0.7%) above February 2022.
  • Personal Income and Consumer Spending (February): Personal income increased $72.9 billion (0.3%) in February, according to estimates released by the Bureau of Economic Analysis. The PCE price index increased 0.3% in February on a month-over-month basis. Excluding food and energy, the PCE price index also increased 0.3% from January. From the same month one year ago, the PCE price index for February increased 5.0% (down from 5.4%). Food prices increased 9.7% and energy prices increased 5.1%. Excluding food and energy, the PCE price index increased 4.6% from one year ago (vs. 4.7% in January).

OPEC Surprise Production Cut

The 48^th meeting of the Joint Ministerial Monitoring Committee (JMMC) took place via videoconference on Monday, 03 April 2023. The Committee reviewed the crude oil production data for the months of January and February 2023 and noted the overall conformity for participating OPEC and non-OPEC countries of the Declaration of Cooperation (DoC).

• • The Meeting noted the following voluntarily production adjustment announced on 2 April 2023 by Saudi Arabia (500 thousand b/d); Iraq (211 thousand b/d); United Arab Emirates (144 thousand b/d); Kuwait (128 thousand b/d); Kazakhstan (78 thousand b/d); Algeria (48 thousand b/d); Oman (40 thousand b/d); and Gabon (8 thousand b/d) starting May until the end of 2023. These will be in addition to the production adjustments decided at the 33rd OPEC and non-OPEC Ministerial Meeting.
  • The above will be in addition to the announced voluntary adjustment by the Russian Federation of 500 thousand barrels per day until the end of 2023, which will be from the average production levels as assessed by the secondary sources for the month of February 2023.mb/d.

Revised World Growth Projections for 2023

• • Global Economic Conditions: The improvement in the outlook is still fragile. Risks have become somewhat better balanced, but remain tilted to the downside.
  • Inflation Outlook: Headline inflation is declining, but core inflation remains elevated, held up by strong service price increases, higher margins in some sectors and cost pressures from tight labour markets. Inflation is projected to moderate gradually over 2023 and 2024 but to remain above central bank objectives until the latter half of 2024 in most countries.

Organization for Economic Co-operation and Development (OECD) (March 2023):

Americas:

• • U.S.:                       +1.5%
  • Canada:               +1.1%

  Asia:

  • China:                   +5.3%
  • Japan:                   +1.4%

  Emerging Markets:

  • Russia:                    -2.5%
  • India:                       +5.9%

   Europe:

  • U.K.:                        -0.2%

  Euro-zone:                     +0.8%

  • Germany:             +0.3%
  • France:                  +0.7%
  • Italy:                       +0.6%
  • Spain:                     +1.7%

   Latin America:

  • Brazil:                     +1.0%
  • Mexico:                  +1.8%

   TOTAL World:             +2.6%

Fed Hiked +25 bps in March

The Federal Open Market Committee raised the Fed funds rate by +25 bps to a range of 4.75% to 5.00% at its meeting on March 22. Markets are now pricing the Fed is likely to raise rates by +25 bps in May, before potentially cutting rates later in the year.

Highlights of the March FOMC Statement:

• • Still Hiking Rates: “The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-3/4 to 5%.”
  • While Acknowledging Higher Risks: “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”
  • Indicating that the FOMC May Pause Soon: “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time. In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

   

   

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Monthly and YTD returns

Definitions:

Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity. GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health. Source: Bureau of Economic Analysis (BEA).

• • GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.
  • The Current Employment Statistics (CES) program produces detailed industry estimates of nonfarm employment, hours, and earnings of workers on payrolls. CES National Estimates produces data for the nation, and CES State and Metro Area produces estimates for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and about 450 metropolitan areas and divisions. Each month, CES surveys approximately 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. Source: Bureau of Labor Statistics (BLS).
  • Initial Claims: An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility. Source: US Department of Labor (DOL).
  • The Consumer Price Index (CPI):Is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available. Source: Bureau of Labor Statistics (BLS).
  • The national unemployment rate: Perhaps the most widely known labor market indicator, this statistic reflects the number of unemployed people as a percentage of the labor force. Source: Bureau of Labor Statistics (BLS).
  • The number of people in the labor force. This measure is the sum of the employed and the unemployed. In other words, the labor force level is the number of people who are either working or actively seeking work. Source: Bureau of Labor Statistics (BLS).
  • Advance Monthly Sales for Retail and Food Services: Estimated monthly sales for retail and food services, adjusted and unadjusted for seasonal variations. Source: United States Census Bureau.
  • Federal Open Market Committee (FOMC): Responsible for implementing Open market Operations (OMOs)–the purchase and sale of securities in the open market by a central bank—which are a key tool used by the US Federal Reserve in the implementation of monetary policy. Source: Federal Reserve.
  • The Federal Funds Rate: Is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. Source: Federal Reserve Bank of St. Louis.
  • The “core” PCE price index: Is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. Source: Bureau of Economic Analysis (BEA).

  Sources: U.S. Bureau of Economic Analysis (BEA), Bureau of Labor Statistics (BLS), U.S. Department of Labor (DOL), Federal Reserve, Federal Reserve Economic Database (FRED), Federal Reserve Bank of Atlanta, U.S. Census Bureau, Department of Housing and Human Development (HUD), U.S. Department of Agriculture, U.S. Energy Information Administration (EIA), U..S Department of the Treasury, Office of the United States Trade Representative (USTR), U.S. Department of Commerce, data.gov, investor.gov, usa.gov, congress.gov, whitehouse.gov, U.S. Securities and Exchange Commission (SEC), Morningstar, The International Monetary Funds (IMF), The World Bank (WB), European Central bank (ECB), Bank of Japan (BOJ), European Parliament, Eurostats, Organization for Economic Co-operation and Development (OECD), National Bureau of Statistics of the People’s Republic of China, Organization of the Petroleum Exporting Countries (OPEC), World health organization (WHO).

  Financial Markets – Monthly and YTD returns (Table): Asset class performance is in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (JPM EMBI Global), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond), and Developed Markets Sovereign (excl. US) (JPM GBI Global Ex US). Source: Morningstar.

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  The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from Amerant Investments, Inc. or any of its affiliates to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

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