Presentation on theme: "New Season for Jobs? 29 October 2014 War Room. HiddenLevers War Room Open Q + A Macro Coaching Archived webinars CE Credit Idea Generation Presentation."— Presentation transcript:
Market Update QE ends in year 6 Volatility Hoax Bullard saves Market sources: HiddenLevers Oil touched $79
Market Update – Ebola Pandemic sources: HiddenLevers, University of Hong Kong, USA TodayHiddenLeversUniversity of Hong Kong USA Today 15% SARS 2003 Airlines crippled from tourist fear Ebola 2014 Airlines doing fine, Delta saying bookings unaffected Macro Snapshot
Oil and mortgage rates crash as the S&P 500 holds its own. Meanwhile, consumer confidence has reached 2005 levels and jobless claims are lowest in a decade.
Why does the Fed create Stress Tests? “These scenarios are not a forecast. Rather, they are hypothetical scenarios designed to assess the strength of banking organizations and their resilience to an unfavorable economic environment.” -Federal Reserve Bank
Review: 2014 Fed Stress Tests (Dec 2014) MISS 10y Treasuries closer to 2 than 3 MISS CPI + Commodities overvalued HIT 15% S&P rise projected.. could happen source: HiddenLevers, Federal ReserveFederal Reserve
GOOD: Fed Baseline Scenario source: HiddenLevers, Federal ReserveFederal Reserve sustained moderate expansion gradual normalization of treasury yields real GDP under 3% unemployment declines to 5% asset prices rising steadily inflation at 2% low equity market volatility average of outside economic forecasters
BAD: Fed Adverse Scenario rapid increase in short-term rates to 2.5% bank costs soar due to rate rise unemployment over 7% global weakening + US inflation squeeze mild US recession into mid-2015 inflation over 4% source: HiddenLevers, Federal ReserveFederal Reserve yield curve higher + flatter decline in home prices, felt more in high gainer areas
UGLY: Fed Severely Adverse Scenario equity market distress exceeds 2008-09 brent crude oil prices rise to 110usd CPI over 4% on oil shock Rates -->2017 Short term at 0 long term at 1% global weakening + intense US recession + oil shock Unemployment over 10% GDP growth takes serious hit -- 4% source: HiddenLevers, Federal ReserveFederal Reserve divergence corporate bonds yields higher rapid exits EM private equity securitizations Economies dependent on imported oil suffer more UMMM?
#FAIL: Fed Severely Adverse Scenario source: HiddenLevers, Federal ReserveFederal Reserve why no scenario for global deflation risk?
Scenario: 2015 Fed Stress Tests Good Baseline Bad Adverse Ugly Severely Adverse The Baseline includes steady equities growth, fast real estate appreciation, and moderate inflation + GDP growth. The Adverse scenario is a stag- flation scenario, with high inflation and poor growth. The Severely Adverse scenario includes an equities decline of 50%, a deep recession, and static interest rates.
Jobs Recovery: Pulse Check sources: Heritage, St. Louis FedHeritageSt. Louis Fed Participation Down Job Openings Up
Jobs Recovery : Comparison to Previous source: BLS, HeritageBLSHeritage Bad news 77 months did much more for past recoveries Good news 77 months to get back to pre-recession employment.
sources: Forbes, SUNY OswegoForbesSUNY Oswego Compared to other global financial crises, post-2007 US jobs recovery has been strong GDP Per Capita has risen modestly in US since 2007, and fallen in every European country save Germany Jobs Recovery: Global Perspective
Jobs Recovery: Quantity vs Quality sources: National Employment Law Project, HiddenLeversNational Employment Law ProjectHiddenLevers Wages decreasing for all but 1%. Jobs recovered are low wage. Employment Cost Index shows slowing of wage gains.
New Season: Tech Automation = Job Killer Unemployment dropping but Who is rejoining work force? Productivity growing but Employment not so much sources: US Bureau of Labor Statistics Lowes Robot Shopper
New Season: Startups Myth sources: US Bureau of Labor Statistics
New Season: Jobs Cycle + Market Cycle When non-farm payrolls drop below 0 and stick there, trouble lies ahead. When non-farm payrolls stay above 0, market tends to rally steadily. sources: HiddenLevers
New Season for Jobs?: Recap US leading first world in job growth Fed clueless on inflation? no markets crash during jobs recoveries US Jobs have surpassed peak
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