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The AM Call: Silver Linings Playbook

  • The week ahead brings us the next FOMC meeting, writing yet another chapter in this economic cycle focused on inflation and rates. While there is almost no chance that the Fed will change its policy rate at this meeting, markets will be attuned the Chair Powell’s comments at the post-meeting press conference. We expect the Chair to execute a “hawkish” turn, emphasizing the lack of further progress on inflation and the Fed’s comfort in maintaining rates at the current level until more progress on inflation is made. As we consider the headwinds presented by this rate policy, we note as well some potential silver linings.
  • One is that we continue to believe the Fed is done hiking rates, even if cuts do not materialize as quickly as hoped. This steady rate posture allows markets comfort that the Fed is unlikely to move higher from here. Another is that inflation is down materially from post-pandemic highs, and even the Fed’s own forecasts do not have core PCE reaching 2% until 2026.
  • Another silver lining is that equities are priced in nominal dollars, and all else equal, inflation causes companies’ revenue and earnings to rise over time, even in the absence of higher margins, expanding multiples, or market share gains. We view this as a positive externality in what otherwise can be a somewhat discouraging macro environment. In the event, equities turned in a strongly positive week last week, as robust earnings from Alphabet (GOOGL) and Microsoft (MSFT) drove investor rotation back into technology stocks. Microsoft’s beat was relatively modest, but welcomed given high expectations and positive comments regarding AI impact on demand, while Alphabet topped EPS estimates by 23.5%, up 61.5% on YoY basis with margin expansion from the Cloud Division, announcing a dividend along with $70 bn in buybacks.
  • In macro news last week, 1Q GDP annualized advance estimate was lower than forecast at 1.6%, below estimate of 2.5% and a slowdown from the 3.4% rate in 4Q23. We note, however, that the advance estimate can sometimes be revised substantially. Personal income and spending were mostly in-line with estimates at 0.5% and 0.6%, respectively. Durables goods exp Transportation were up by 0.2%, in-line with estimate and slightly higher than the revised February figure.
gdp annualized qoq
  • March PCE data came in largely as expected. Both headline and core PCE were up by 0.3% MoM. Core PCE was up 2.8% YoY, slightly worse than estimate of 2.7%.
  • In other tech equity news, Meta (META) also posted modest beat among extremely high expectations, but saw shares sell off after providing revenue guidance that disappointed. As well, Tesla (TSLA) missed results significantly across all major lines as revenue contracted 9% and EPS 50% on YoY, but shares soared regardless given Elon Musk announced during the conference call to anticipate the release date for the lower priced Model 2 that had previously been reported to have been scrapped to as soon as late this year. In other earnings, Snap Inc (SNAP), Fiserv (FI), Danaher (DHR), General Motors (GM), General Electric (GE), Chipotle (CMG) and Texas Instruments (TXN) were other positive highlights.  Verizon (VZ), Intel (INTC), IBM (IBM), Bristol Meyers (BMY), Roku (ROKU), O’Reilly Auto (ORLY) and Sherwin Williams (SHW) were among the biggest disappointments. In corporate news, Apple (APPL) iPhone sales in China fell 19% in the first quarter, press reports indicated that IBM is in talks to acquire HashiCorp (HCP), and Anglo American (AALLN) received an unsolicited hostile takeover bid from rival BHP Group (BHP).

The Week Ahead

  • This week’s macro focus will be on the Fed, which meets on Wednesday.
  • On Friday, the April jobs report will be released. The estimate calls for 250K change in nonfarm payrolls, a steady unemployment rate (3.8%), and average hourly earnings up 4.0% YoY.
  • In equities this week, Amazon (AMZN), Apple (APPL), Advanced Micro (AMD), MicroStrategy (MSTR), Qualcomm (QCOM), Pinterest (PINS), PayPal (PYPL), Starbucks (SBUX), McDonalds (MCD), Coca-Cola (KO), Monster Beverages (MNST), 3M (MMM), Eli Lilly (LLY), Kraft Heinz (KHC), Pfizer (PFE), Mastercard (MA), eBay (EBAY), DoorDash (DASH), Cigna (CI), Booking.com (BKNG), Coinbase (COIN), DraftKings (DKNG) and Sofi Financial (SOFI) are among companies set to report.

Market Summary – Returns and Yields

For additional insights, be sure to check out last week’s blog post.

Definitions, sources, and disclaimers


  • 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 employmenthours, 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 – Recent Prices and Yields, and Weekly, Monthly, and YTD (Table): Bloomberg, Weekly Market Data is in USD and refers to the following indices: Macro & Market Indicators: Volatility (VIX); Oil (WTI); Dollar Index (DXA); Inflation (CPI YoY); Fixed Income: All U.S. Bonds (Bloomberg Aggregate Index); Investment Grade Corporates (Bloomberg US Corporate Index); US High Yield (Bloomberg High Yield Index), Treasuries (ICE BofA Treasury Indices); Equities: U.S. Industrials (Dow Jones Industrial Average); U.S. Large Caps (S&P 500); U.S Tech Equities (Nasdaq Composite); European (MSCI Euope), Asia Pacific (MSCI AP), and Latin America Equities (MSCI LA); Sectors (S&P 500 GICS Sectors) Source: Bloomberg. Fed Funds Rate probabilities, Source: CME FedWatch Tool.  

Important Disclosures:

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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