- Citi indicated that the amount of cash state and local government bondholders would receive from principal and interest payments in May will exceed the volume of new debt sales by about $9.50B next month. With demand being lackluster over the last few months, some think this will turn around for next month; we shall see. Fund outflows continue to be on the decline, $4.8B, $3.8B, and now $2.9B this week; we will need this to "slow down" to have order in our markets.
- The U.S. has become the world's "safe haven" after Russia invaded Ukraine and the continuing war. The U.S. dollar (USD) has appreciated substantially since then, and its appreciation has accelerated even more rapidly over the past couple of weeks.
- Economic data and surveys released this week showed an expanding U.S. economy in general, but perhaps with somewhat slowing growth. The negative Q1 U.S. actual GDP headline obscures the strong U.S. demand for goods and services. Future outlooks were often uncertain and even sometimes pessimistic.
- There were many positive and negative surprises in this week's earnings releases. As expected, management's guidance of future results and discussions of profit margins proved to be determinative and the stock trading reactions were somewhat unpredictable.
- In my opinion, many investors have become "comfortably numb" based on the likelihood of a recession coming, supply chain issues, and high inflation numbers. This week, the FED meeting will be an indicator, not so much "how much" the rates will move, but the language in which the FED will speak based on this move and future moves. Powell's overall thoughts are 2%. This target will be nearly impossible to reach without a big recession which I do not believe will happen. However, as we see a 200 to 250 bps move this year in Fed Funds, I think you will see the CPI come down to around 5%.
David Loesch
dloesch@drlgroup.net
605-B Park Grove
Katy, TX 77450
866.664.4040 (toll-free)
281.398.8600 (direct)
281.398.8607 fax
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