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LenderHub

SWBC's LenderHub blog is a one-stop resource for lenders.

 

Pope Francis Weighs in on the Dark Art of Money Magic

Every now and then in our business, a headline comes across the newswires that makes you do a double and triple take.

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May 2018 Market Commentary

As we reach the end of a stellar Q1 earnings season, the US equity markets continue to trend sideways in search of the spark that will reignite the “animal spirits.” More than 400 of the S&P 500 constituents have reported Q1 results thus far, with 75% delivering upside surprises on the top line and 81.5% beating on the bottom line.

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Yes, Virginia, There Is an Economic Cycle

The markets seemed to heave a sigh of relief last week over the April labor report, which showed weaker than expected average hourly earnings (AHE) growth. The Wall Street consensus was 2.7% year-over-year (YoY) growth, and the print came in at 2.6%. However, the markets shouldn’t feel relieved for too long.

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The Unbearable Flatness of Being

Every profession has its own version of a very bad time, a time where there really is no way to win, a time when the best result is not losing too badly. For bond traders, the flat yield curve is such a time. A wise man once said, “You never notice oxygen until it’s not there.” A normal, positively sloped yield curve delivers life-sustaining oxygen to a bond trader in the form of “carry.” When the yield curve is positively sloped, a five- or ten-year bond funded by one-month money, interest earned on the bond position is greater than interest paid to fund the position. That is called “positive carry.”

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This Market Can Really Take a Punch

April sure has been an interesting month, and we are only midway through it! In just the last two weeks, the U.S. has seriously sparred with its greatest economic competitor (at least by size of economies), China, and its greatest military competitor, Russia. The President of the United States had the offices of his private attorney raided by the FBI, perhaps pushing the President closer to a constitutional showdown over the fate of Special Counsel Robert Mueller.

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Germans? Forget It, He's Rolling.

Last week, another move toward a global trade war was initiated, as President Trump spoke of slapping an additional $100 billion in unspecified tariffs on China. The Chinese responded that they will have a very specific list of tariffs on U.S. goods, totaling $100 billion in retaliation.

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March 2018 Market Commentary

The U.S. equity markets remain in a corrective trading range between the January 26th high of 2872 and the rising 200 day moving average of 2588. After an extended period of tranquility following the U.S. Presidential election, volatility has broken out of its own trading range. Beginning with the blowup that led to the closing of several leveraged inverse VIX ETFs, intraday market swings over the last six weeks have been wide and wildly unpredictable (see chart 1). From a technical perspective, the S&P 500 closed the week with a successful retest of the 200 day moving average, providing some hope for the bulls going into the weekend.

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Welcome to the Great Game

Last week was supposed to be the coming-out party for new Federal Reserve Chairman Jay Powell as he presided over his first FOMC meeting. The Fed—as predicted by just about everyone—raised the Federal Funds Rate 25 basis points (the effective range is now 1.50%-1.75%). Perhaps more important than the policy decision was how the new Chairman answered questions about policy and the economy going forward.

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Take this Job and J.O.L.T. It!

Friday’s employment report was, on the surface, a mixed bag, with a surge in job growth coupled with lower than expected average hourly earnings (AHE) growth. Last month’s 2.9% year-over-year growth in AHE was a shocker, as it showed that the growing strength of the U.S. economy was not only adding jobs, but workers were either finding better jobs or getting wage increases from their current employers. The February report —published Friday— showed a slight revision to January’s AHE (2.8% from 2.9%) and a lower than expected, but still strong, 2.6% increase in February.

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Secretary Mnuchin Fires the First Shot

Last night, Secretary of the Treasury Steve Mnuchin had some rather interesting things to say about inflation: “There are a lot of ways to have the economy grow. You can have wage inflation and not necessarily have inflation concerns in general.” This might be true in periods where we have had tremendous leaps forward in productivity. Absent of that, however, this thinking runs counter to traditional economic thought, which is the thought that governs the Fed.

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