CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY
February 11, 2019
US rates rallied on risk-off sentiment sparked by concerns about slowing global growth, another potential US Gov’t shutdown, and US-China trade anxiety (Mar 1). The most influential news of the week was ECB lowering its estimate of 2019 GDP growth for the 19-nation euro zone to 1.3% from 1.9%, warning that the region faces “substantial” risks from an economic slowdown, including a recession in Italy and Brexit. Australia’s central bank also lowered its growth outlook and India’s central bank cut rates in a surprise move. The ECB news came amidst potential resumption of the partial Fed Gov’t shutdown over Trump’s US-Mexico border wall and news that the US and China remain far apart in trade negotiations. A Trump-Xi meeting is also not expected to occur prior to the Mar 1 deadline. Stocks finished flat on the week with the S&P 500 up only +5 bps on the week (+8.02% YTD)...
This week is a pivotal week for the global trade outlook as high level talks are happening in Beijing between US-Chinese officials. We also have continued 4Q18 earnings season with Nestle, Coca-Cola, Nissan, among others, reporting. There are also several Fed speakers...
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SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 1st QUARTER 2019
Please find attached Ramirez & Co.’s Quarterly Macroeconomic Outlook. In our report, we continue to monitor the US economy, global events and the Fed’s outlook on the economy and rates:
- In 2018, with accommodative fiscal and monetary policies, and strong global growth, US real GDP grew at about 3% – somewhat above the economy’s longer-run growth potential, which the Fed estimates to be a bit below 2%.
- The FOMC begins to take a more judicious stance towards the future path of monetary policy – in light of the cumulative 225 bps tightening, 100 bps of which occurred in 2018.
- FOMC participants estimate that the neutral longer-run federal funds rate is in the 2.5%-3.5% range, whose lower bound is near the current rate.
- As the FOMC becomes more uncertain about the tightening effects of the balance sheet roll down, it begins to pay more attention to the maturity structure of the portfolio and the balance of Treasuries vs. mortgage-backed securities.
Members of our Financial Strategies Group, Niso Abuaf, Konstantin Semyonov and Duncan Sinclair, would be happy to discuss further any of the material with you.
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