Data Contradicts Market


The market moved in the opposite direction of economic data last week; as has been the trend over the last several years.

Housing data disappointed, as existing home sales only grew 1.2% and home prices increased only 5.1% year over year in January[1]. Many of the February reports were muddied by winter weather that kept buyers away, as is typical of winter months. This could lead to a spring rebound due to pent up demand and rates that remain historically low.

GDP data for the fourth quarter was revised last week showing no overall change to the broad rate of 2.2%[2]. Consumption increased more than anticipated, however imports also increased, offsetting the consumption increase. As much of the world has been experiencing deflation due to oil prices falling, the US has remained level, making import prices more competitive.

Core consumer prices (minus food and fuel) in the US came in last week as an increase. They climbed to 1.7% in February from 1.6% in January year over year[3]. This shows that without the volatile impact of oil prices that our economy is still strengthening due to increased workforce, increased average pay, and improved hours.

PMI data for the week reflected optimism for the future. Composite, services, and manufacturing data all increased. The lowest of the three was manufacturing at 55.3, well above the 50 mark that reflects the line between expansionary and contractionary conditions.

While the Federal Reserve Board (FRB) has reduced projections for growth in the US, they will act based upon data, not projections. Recent projections were looking at June as when the FRB would raise rates. Most recent comments and projections from the FRB has cause many to believe that the FRB will not raise rates until later this year. Again, there is always the caveat that should the economy improve more than the FRB anticipates that the time table could be moved up.

While much of the economic data discussed here in sounds appealing, it also comes with the known detractor of tightening economic policy. The S&P 500 shed 2.20% last week while all this positive data was released.


German data showed continued optimism. Greece continues to attempt to restructure their required austerity measures. HSBC reported that China’s manufacturing slipped into contraction territory at 49.2 for March. Markit Composite PMI for the Eurozone came in at a healthy 54.1 for March[4].


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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.

Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.

[1] www.mfs.com – week in review

[2] www.jpmorganfunds.com – economic update

[3] www.investing.com – economic calendar

[4] www.investing.com – economic calendar