Economic weakness: Is it just the weather?

Next week's data will provide some important clues.

Robert Johnson, CFA 13 April, 2015 | 5:00PM

Most developed equity markets performed in a narrow range of 1%-2% weekly price increases while emerging markets continued to soar, this week up by another 4%. Emerging markets are up about 8% over the past two weeks, as fears that the U.S. Federal Reserve would quickly raise rates greatly diminished after last week's soft employment report. More stimulus and easing measures out of China a couple of weeks ago continue to stimulate interest in China and other emerging markets.

The U.S. equity markets had two good days this week and nothing the rest of the week. Like emerging markets, U.S. stocks rallied sharply on Monday on the reduced possibility of a June rate increase. Then the market sat around until Friday when a potential spin-off of  GE's GE financial division excited market participants. After a dip on Monday, the 10-year bond yield for the week rallied from 1.91% to 1.95%. Commodities also managed a small 0.8% increase as oil closed higher. Oil (WTI) was up 5% for the week to close over US$51 on worries about the Iran nuclear deal being consummated.

There was no economic news to speak of this week. The one exception might be the Job Openings report, which suggested that last Friday's sharp fall in employment growth might have just been a statistical fluke. Openings, at 5.1 million positions, are higher than at any time dating back to 2001. But even that really didn't have much of an effect on markets. In addition, the Federal Open Market Committee minutes released on Wednesday drew nothing more than a yawn, which is exactly what they deserved. Until the data says the economy is getting stronger and inflation is moving up toward 2%, nothing is going to happen. However, when that does happen, the Fed probably won't wait around for long. That is why next week's economic data will prove to be so critical.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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