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A Macro View – March of the Unicorns?
Chart of the Week
- GDP data offsets fear of slowing economy. US first-quarter GDP expanded by 3.20% much higher than Wall Street’s expectation of 2.50%, and the best growth rate to start a year since 2015. Net trade (exports jumped by 3.70%, while imports contracted by 3.70%) and inventories contributed almost 170 basis points of the rise. Personal spending, the biggest component, also rose, as an increase in spending on services and nondurable goods offset a decline in spending on durable goods.
- The Federal Reserve (Fed) keeps rates steady despite inflation dip. In its latest FOMC meeting, the Fed unanimously voted to keep the rates unchanged, despite the core inflation dropping to 1.60% year over year in March, a 19-month low. The Fed acknowledged that both overall and core inflation have declined and are running below their 2.00% target, but Chairman Jeremy Powell described the subdued inflation as ‘transitory.’
- Job market continues to grow: The US economy added 263,000 jobs in April, and the unemployment rate fell to a near 50-year low to 3.60%, both beating market expectations. The strong job numbers were offset by weaker-than-forecast average hourly earnings growth of 0.20% in April and a drop in the labor force participation rate to 62.80% from 63% in March.
- In Equities, the S&P 500 arrested its two day slide after Friday’s better-than-expected jobs data. European shares ticked higher on Friday, as the Stoxx-600 Index recovered from its midweek slide, aided by gains in banks and Adidas stock. Equity indices in the Asia-Pacific region ended the week on a mixed note, while markets in China and Japan remained closed. Oil declined for the second straight week, as stockpiles in the US rose to their highest levels since 2017.
- The yield on the 10-Year US Treasury Note rebounded to the 2.50% level after the Fed said that the inflation decline is transient. However, the yield rose after Friday’s strong jobs data.
- The Dollar Spot Index gained in the wake of the Fed keeping rates unchanged and better jobs data.
- Beyond Meat (BYND), the vegan unicorn, became the latest unprofitable, disruptive company to go public. Its share price soared 163%, closing in at $65.75, marking the best first day percentage gain for an IPO this year in the US.
- Among major economic data, the ISM manufacturing index for April fell to 52.80% from 55.30% in March. The April reading is the lowest since October 2016.
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