3 Stories in the global economy that should not go un-noticed
Sequestration, continued economic turmoil in Europe, and debate of Federal Reserve fiscal stimulus dominated the headlines in the first quarter of 2013. We continue to keep an eye on the facts that rise above the noise of the media.
Equity markets experienced one of the best first quarters in years, with the Dow logging its strongest quarter since 1998. After flirting with record highs for more than a week, the S&P500 finally broke through its 2007 ceiling to close at a new high of near 1,570. For the quarter, the S&P500 gained 10.03%, the Dow increased 11.25%, and the Nasdaq closed up 8.21%.
Here are the 3 stories this week that rose above the noise:
Hiring Spreads, but Only 14 Cities Top Prerecession Level
The employment picture has improved a great deal since the bottom of the 2008-2009 recession, but still remains below the pre-recession peak employment level of 2007 for 86 of the nation’s 100 largest metropolitan areas.
Overall, there are still 3 million fewer people employed compared to the pre-recession peak. Six of the 14 metropolitan areas that have a better employment situation than in 2007 are in Texas, with the Lone Star State benefitting from an economy that is heavily based healthcare, energy, technology, and education. Additionally, the Texas real estate market did not collapse, further improving their employment situation.
Surge in High-Yield Bonds a 'Big April Fool's Joke'
With interest rates sitting at extremely low levels, investors have piled into asset classes traditionally viewed as less interest-rate sensitive,” such as high-yield bonds. The spread of high-yield rates over Treasuries have compressed considerably since the heights of the credit crisis in 2009.
A recent CNBC article looked at the concerns various money managers have over the strong run in the high-yield market. As with any market, there is a difference of opinion as to where we are in the credit cycle of high-yield bonds. However, warning signs, such as foreign investors using leverage to access the high-yield market, are raising eyebrows. We believe that as long as the Fed keeps its low-interest-rate policy intact, high-yield bonds will continue to attract new money.
As Economy Heats Up, Traffic Backs Up
Floyd Norris writing in The New York Times discussed an off-the-beaten path economic indicator that is confirming more well-known indicators in showing a surprisingly resilient U.S. economy. The indicator, known as the Inrix Gridlock Index, measures traffic patterns and considers increasing delays as an indicator of increased economic activity.
Currently, the indicator shows a broad increase in traffic backups in the U.S. and general weakness in Europe. Although the indicator does not have a long history to examine at this point it is an interesting additional data point which is currently confirming the relative strength of the U.S. economy that is also showing up in traditional economic indicators.
