Jun 10, 2019
After the last ten to twenty years of market ups and downs, it takes a lot to surprise experienced investors. One recent trend that qualifies, though, is the rapid and aggressive pricing of Fed rate cuts in the coming months. The futures market is pricing in over an 80% chance that the FOMC will cut rates between now and the end of July. This comes even as there has been an absence of any overwhelmingly supportive or consistent commentary from Fed officials suggesting that rate cuts are imminent.
With rate cuts likely on the horizon, it’s time to look back at prior rate-cutting cycles from the FOMC to see how equities performed leading up to and after the first cut in an easing cycle. To do this, we looked at all prior periods in the last thirty years where the FOMC cut rates at least three times after a series of hikes. While we could have gone back further in our analysis, the last thirty years essentially covers the period since Greenspan became the Fed chair, and it also wasn’t even until 1994 that the FOMC actually announced what the interest rate policy was on the day of their meetings. Therefore, the further you go back in time the less relevance there is to circumstances today. Interestingly enough, at 1,272 calendar days and counting, the current rate hike cycle has been the longest of the last 30 years. Our latest B.I.G. Tips report provides an insightful look at the stock market’s performance during prior rate cut cycles. To see the report, sign up for a monthly Bespoke Premium membership now!
Jun 6, 2019
Heading into tomorrow’s report, economists are expecting an increase in payrolls of 180K, which would be a sizable decline from April’s much stronger than expected reading of 263K. In the private sector, economists are expecting an increase of 172K, which represents a 64K decline from last month’s reading of 236K. The unemployment rate is expected to remain unchanged at 3.6%. Average hourly earnings are expected to grow at a rate of 0.3% versus last month’s 0.2% reading last month. Finally, average weekly hours are expected to show a slight increase to 34.5 from 34.4.
Ahead of the report, we just published our eleven-page preview of the April jobs report. This report contains a ton of analysis related to how the equity market has historically reacted to the monthly jobs report, as well as how secondary employment-related indicators we track looked in April. We also include a breakdown of how the initial reading for April typically comes in relative to expectations and how that ranks versus other months.
One topic we cover in each month’s report is the S&P 500 stocks that do best and worst from the open to close on the day of the employment report based on whether or not the report comes in stronger or weaker than expected. In other words, which stocks should you buy, and which should you avoid? The table below highlights the best-performing stocks in the S&P 500 from the open to close on days when the Non-Farm Payrolls report has been better than expected over the last two years.
Of the top performing stocks on days when NFP beats expectations, seven sectors are represented, but Consumer Discretionary leads the way with six stocks. Mattel (MAT), soon to be booted from the S&P 500, has been the best performing stock with an average gain of over 2%. In terms of consistency, Alexion Pharma (ALXN) and Netflix (NFLX) have seen gains over 80% of the time.
For anyone with more than a passing interest in how equities are impacted by economic data, this April employment report preview is a must-read. To see the report, sign up for a monthly Bespoke Premium membership now!
Jun 4, 2019
We’ve just published a B.I.G. Tips report that discusses the recent plunge in 10-year yields and provides a look at how stocks and bonds have followed through in similar periods where the yield in the 10-year reached extremely low levels. To put the recent move in perspective, levels like Monday’s have only been recorded on thirteen prior days in the last 30 years! To read this report and access all of our other reports, start a two-week free trial to Bespoke Premium!
