On The Radar: How has the recent improvement in various economic indicators affected the market’s perception of future Fed action?

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OnTheRadar
May 2019
FAQs on the Markets and Economy
On the Radar is a biweekly publication providing quick and concise answers to the topical investment and economic questions that are on investors' minds.
New questions in this issue:
1.
How has the recent improvement in various economic indicators affected the market's perception of future Fed action?
It has been wild ride for this metric. Back in the autumn, when the economic outlook was very strong (unemployment at cycle low of 4.7% and PMI manufacturing at cycle high of 60.8), the stock market hit an all-time high.
2.
What is City National Rochdale's current thinking about the Fed and monetary policy?
We continue to believe the Fed will not make any changes to the federal funds rate this year. The federal funds futures market has been a wild ride since last summer.
3.
What is the outlook for the global economy?
Amid elevated uncertainty in many advanced economies and signs that higher tariffs are weighing on international trade, Global prospects continue to moderate and become more divergent.
4.
With the market back at record highs, is City National Rochdale still bullish on U.S. equities?
Yes. In our view, the recovery in stocks has been justified by fundamentals, and we see few warning signs signaling recession or the end of the bull market. However, the pace of recent gains is likely to moderate and a consolidation period or pullback is possible over coming months.
5.
With the S&P 500 now above the previous record high of September 2018, have corporate credit spreads also recovered?
Credit spreads, which are the yield advantage for owning a corporate bond over a treasury security, increased in Q4, indicating more perceived risk. Corporates, like many other "risk assets" underperformed safer assets during that period of time.
6.
What is City National Rochdale's investment outlook for 2019?
Given our positive assessment of the fundamental backdrop, we remain bullish on equities in general for 2019 and continue to see attractive prospects in the opportunistic fixed income class.
Read More on CNR.com »
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