Broker Check

Market News & Commentary - From The Desk Of David Loesch 11.17.2022

November 17, 2022
Share |
  • The CA state nonpartisan budget advisor warned they would likely see a $25B deficit in its next fiscal year because of slumping revenue. The FED's rate increases have slowed the economy resulting in lower stocks, falling home prices, and less demand for items such as cars. The agency is projecting a deficit which would be the first since 2018. I do not expect this to change the outlook of the bonds; however, it is something to watch.
  • US retail sales posted the most significant increase in 8 months in October, indicating demand for goods is broadly holding up despite decades of high inflation and a worsening economic outlook. I suspect this is why you see yields up a bit today on the T markets, and I expect we will also have a minor pullback on yields in the MUNI markets.
  • JP Morgan indicated yesterday the US would enter a "mild" recession next year thanks to interest rate hikes that could cost more than 1MM Americans their jobs, and the FED will pivot to cutting borrowing costs in 2024. Many, including me, believe the FED will raise the benchmark rate by 50bps in December and 25bp in January, and perhaps the following meeting in 2023. I expect to continue to see the CPI numbers fall, which should add fuel to the rally we are experiencing now.
  • Goldman indicated yesterday they expect a significant easing of US inflation in 2023, reflecting softening supply chain problems, a peak in shelter inflation, and slower wage growth. The company expects the core PCE measure to decline to 2.9% by December 2023 from 5.10% currently. Goldman and other firms are "aligned" with this thought. I suspect more firms will indicate this same trajectory over the next several months.
  • FED Governor Chris Waller indicated, "we have a way to go" before the US Central bank stops raising rates despite good news on consumer prices. Waller cautioned that officials are not close to a pause and could continue to move rates up 75bps; however, many other officials have indicated they could moderate to 50bps. I suspect we will see 50bps in December and another 50-25bps in January. However, with the numbers last week regarding CPI, we will see overall moves slow down in the 1st Q of 2023, bringing our markets back to some stability.
  • Investors in equities and FI should not get short-sighted; however, numbers are coming down, yields overall were market down ~17bps, including Friday, and bonds are scarce due to the average supply. This might not be the bottom; however, as we have been discussing, we could be very close.

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

 

This report has no regard for the specific investment objectives, financial situation, or needs of any particular recipient. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Income from municipals may be subject to state and local taxes and the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility as to principal if the security is not held to maturity. The non-rated bonds (NR) should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.

Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer, Member FINRA/SIPC.

The DRL Group is not a registered entity or a subsidiary or control affiliate of NewEdge Securities, Inc. 

Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.

Reminder: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not e-mail orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.