With the FOMC voting to continue tapering assets purchases down to $35 billion per month in its latest meeting, our base case remains that the Fed will continue reducing purchases by $10 billion per meeting, and eliminating the remaining $15 billion in October's meeting.
U.S. real Gross Domestic Product (GDP) contracted at a -1.0% quarter/quarter annual rate in the first quarter (1Q). While it was clearly a bad quarter, this revision into negative territory was widely expected, and the size of the revision was not abnormal. We always hesitate to call a blowout negative report 'old news,' but that is indeed what this number appears to be.
The housing recovery has been slow but steady throughout the U.S. There have been some concerns on weather disrupting activity in 1Q (eg. the Fed's Beige Book). But housing has been in an uptrend around the country in a longer-term view.
Examining the VIX data over the past 20 years suggests that volatility tends to move in secular fashion -- i.e. the relatively high level of volatility from 1998 to 2003 was bookended by relatively low levels of volatility in the mid-1990s and the mid-2000s. While this is undoubtedly less fun, such markets tend to give truly active managers a leg up.
The organization officially tasked with determining the start and end dates of the recessions – the National Bureau of Economic Research in Cambridge, Massachusetts – has, unsurprisingly, a sophisticated and nuanced approach to coming to its conclusions on the matter. Historically, they have relied heavily, but not exclusively,on four time series: Industrial Production, Real Manufacturing and Trade Sales, Employment, and Real Personal Income Less Transfers. In each instance, the current economic recovery continues to disappoint.