INSIGHTS FROM FIRST FOUNDATION

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The Week Ahead – Best Week of 2019

| 6/10/19 8:13 AM

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

Last year I wrote about my mother-in-law looking to buy a house here in the Los Angeles area. Like a lot of people, she was having a difficult time finding anything she liked within her budget. Well, the combination of evolving expectations, patience and an eager seller meant she is now solidly in escrow. It will be nice to have her close to the kids.

While the housing market and my mother-in-law seemed to meet halfway, we are seeing evidence of the housing market on an upswing:

  • Mortgage rates have come down
  • Employment and wages continue to be supportive
  • Household formation is increasing
  • Consumer confidence is elevated

Despite the recent uptick in the U.S. real estate market, the economy continues to cool. Indeed, The World Bank recently slashed its 2019 global growth outlook from 2.9% to 2.6% in its semiannual forecast. To stem the tide of slowing growth, the Federal Reserve sent the market a powerful signal that it would likely add stimulus by reducing interest rates should the multi-front trade war escalate:

“We are closely monitoring the implications of these developments for the U.S. economic outlook, and as always, we will act as appropriate to sustain the expansion,” Mr. Powell said last Tuesday during a speech in Chicago.  

Fed Chair Jerome Powell’s rhetoric along with China and Mexico’s willingness to negotiate sent the Dow up more than 1160 points (+4.6%), making it the best week of the year. This was an important bounce as many of the so-call FAANG (Facebook, Amazon, Apple, Netflix & Google) stocks had fallen into bear-market (-20%) territory.

This week we will be getting some crucial data about inflation. After picking up last year, inflation has been decelerating. This low inflation impulse has allowed the Federal Reserve to hike rates very slowly this cycle, and it is going to be pivotal for markets as expectations are strongly weighted towards interest rates cuts going forward.

Data deck for June 10–June 14:

Date

Indicator

Period

June 11

NFIB small-business index

May

June 11

Producer price index

May

June 12

Consumer price index

May

June 12

Core CPI

May

June 12

Federal budget

May

June 13

Weekly jobless claims

6/8

June 13

Import price index

May

June 14

Retail sales

May

June 14

Retail sales ex-autos

May

June 14

Industrial production

May

June 14

Capacity utilization

May

June 14

Consumer sentiment index

Jun.

June 14

Business inventories

Apr.

    

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Brett Dulyea, CFA, CAIA
About the Author
Brett Dulyea, CFA, CAIA
Mr. Dulyea serves as a Portfolio Strategist on the investment team and is responsible for conducting manager research and executing investment strategies for clients. As a member of the investment committee, he provides market commentary and investment insights. Mr. Dulyea’s specializes in advising client portfolios, defining investment plans, and communicating the firm’s investment viewpoints. Prior to joining the firm, Mr. Dulyea was a Director, Portfolio Manager at Deutsche Bank. In addition to working directly with clients, he was a member of the Fixed Income Strategy Group and managed customized portfolios for clients. He previously worked in the Wells Fargo Wealth Management Group as a Vice President, Senior Investment Strategist and at Merrill Lynch as a Vice President, Portfolio Manager. Mr. Dulyea earned his Master’s in Business Administration (MBA) from California Polytechnic University, Pomona and holds the Chartered Financial Analyst® (CFA) designation and the Chartered Alternative Investment Analyst (CAIA) charter. He earned his Bachelor’s degree from the California Polytechnic University, Pomona. He also served as an adjunct Professor of Finance at California Polytechnic University, Pomona for two years. Read more
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