Anzo Capital: Weekly Market Review

[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 7 Jun 2021

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US Cost Of Living Hits 13 Year High

The cost of living for US citizens jumped for the fourth month in a row, taking the annualized rate to a 13 year high of 5%. The soaring prices are largely attributable to the reopening of the economy and ‘base effects’ which refer to a much lower comparison in the previous year, as a result of the pandemic, making the reading look more substantial than is indicated by current economic conditions. The Fed has warned that the inflationary effects are temporary and should normalise as the recovery continues.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 14 Jun 2021

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US Dollar Is Back In The Game

US retail sales dropped 1.3% in May due to a shift in spending behaviours as the vaccination programme progresses and citizens move away from major online purchases to family visits. Consumer spending has jumped 28.1% year-on-year in a sign that consumption is beginning to pick up as the economy reopens. As many predicted, the Fed is contemplating raising interest rates earlier than originally projected. A total of 13 of the 18 committee members expect to see at least two rate hikes by the close of 2023. The change is driven by the acknowledgment from Chairman Powell that ‘inflation could turn out higher and more persistent than we expect.’ He did state that more data reflecting ‘substantial progress’ in the economy would be required to support a taper in asset purchases.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 21 Jun 2021

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Is The GBP The One To Watch?

UK consumer price inflation registered 2.1% growth for May, exceeding the Bank of England price stability mandate of 2% annualised inflation. Despite this, the bank maintained their current policy stance with no changes to the asset repurchasing programme or forward guidance policy. However, there were some hints that the bank will taper stimulus next year. Private sector output appears to be surging in the second quarter, as signs point to further recovery of UK economic growth. New orders and output do appear to be coming off a peak and surging demand, specifically in the hospitality sector, may stabilise in subsequent quarters.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 28 Jun 2021

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Inflation Is Coming

The Non-Farm payroll report beat expectations at 850,000 new payrolls for the month of June. However, the unemployment rate did rise during the month to 5.9% with the economy still some way off of pre-pandemic employment levels, with an extra 6.7 million citizens out of the labour force since February 2020. Staff shortages are driving up earnings which are likely to filter through to inflation numbers. These concerns are particularly apparent in the Manufacturing sector where June’s PMI report recorded a contraction in the employment subsector despite output growth at 60.6%.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 5 Jul 2021

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The Fed Takes Note Of Price Pressures

Minutes from the FOMC June Meeting indicated that some committee members acknowledged that tapering of asset purchasing would probably happen sooner than they had expected, yet no timeline was given for such policy moves. The established stance of waiting until ‘substantial further progress’ in economic conditions remains. A now majority number of committee members felt there was upward pressure on prices brought about by labour shortages and supply chain disruptions, yet no serious debate was made with respect to hiking interest rates. ISM Services PMI data showed that the sector continues to enjoy strong growth at 60.1% for June, albeit at a more moderate pace. Business activity and new orders continue to climb yet pressures are building from labour market shortages, with the employment index contracting at 49.3%.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 12 Jul 2021

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Fed Under Pressure As Inflation Soars Again

The Federal Reserve is under pressure, once again, as headline inflation soared to a 5.4% annualized rate in June. The committee has argued that climbing prices are transitory and largely due to base effects of plummeting prices during the height of the pandemic in 2020. This stance is becoming increasingly difficult to justify and therefore an interest rate move in 2022 is highly probable. US citizens continued the spending in June with a 1.3% spike in retail sales for the month, taking the annual rate of retail sales growth to 18.5%. Momentum looks strong going into the third quarter and we should see that reflected in GDP figures.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 26 Jul 2021

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Is The US Dollar Making A Comeback?

US economic growth figures fell below expectations at 6.5% for the second quarter of 2021. Despite a robust quarter in terms of consumer spending, bottlenecks in supply chain resulted in manufacturers struggling to maintain stock levels in order to meet demand. Despite the climb in consumer confidence, fuelled by massive stimulus, the job market remains a concern and is well below pre-Covid levels. The Fed will be hoping that a spike in unemployment claims signals an increase in labour market participation, as 400,000 new jobless support claims were made in the week ending 24th July. Unsurprisingly, the Fed left policies unchanged at the last meeting.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 2 Aug 2021

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A Boost For US Jobs And Wages

US jobs data was positive; with a total of 943,000 new jobs added to the labour market in July, beating a forecast of 870,000. A total of 10.1 million new job openings suggests that the slow recovery of the labour market is due to a worker supply shortage rather than a lack of available jobs. As a result, we are starting to see upward pressure on wages in order to fill positions. All signs are pointing to a reduction in stimulus provided during the height of the pandemic, which may also spur citizens to seek employment.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 9 Aug 2021

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A Taper Around The Corner?

US inflation flattened in July to 0.5% as forecast which many spectators are taking as a sign of cooling price pressures. However, the annualized rate of inflation remains at 5.4% and significantly above the Fed’s target of 2%. Most components of the index kept the same pace of growth as the previous month indicating that there is broadening inflationary pressures. An early taper is not off the cards yet. Several Fed members including Bostic and Rosengren suggest a possible taper in the near-term as well as a Fed Funds rate hike in 2022.

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[Anzo Capital]

Weekly Market Review by Anzo Capital
Reflecting on the week of 16 Aug 2021

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Short-term US Dollar Weakness Ahead?

US spending declined more than expected in July, as stimulus began to fade and the world’s largest economy still grapples with spiking Covid-19 cases. Inflation expectations have also dampened consumer sentiment yet services should start to see a rise in demand, as employment continues to rise along with household incomes. A headline contraction in sales of 0.4% was registered for the month. Despite the result, FOMC meeting minutes suggest that the Fed is ready and preparing for the taper. As the committee acknowledged that ‘progress has been made’ with respect to key economic metrics. The Fed highlighted concerns over labour supply which may dampen progress for the second half of the year. Markets are pencilling in a September announcement.

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