Monthly Economic & Market Update - Region One ESC - Ash Mehta - Vice President, Investment Advisory Services Karen Proctor - Regional Director of ...
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Monthly Economic & Market Update – Region One ESC Ash Mehta – Vice President, Investment Advisory Services Karen Proctor – Regional Director of Marketing, Texas CLASS October 22nd, 2021
Economic & Market Update
Macroeconomic Themes
Debt Ceiling Debacle
Transitory Inflation?
Federal Reserve Taper Talk
Economic Update - Region One ESC- October 22nd, 2021 3
• Source: Bloomberg
COVID-19 US Daily New Cases Net Change
Daily New Cases Net Change
Economic Update - Region One ESC- October 22nd, 2021 4
• Source: Bloomberg
Federal Reserve Economic Forecast
U.S. Real Gross Domestic Product (Annual)
Real GDP YoY (Percent)
GDP contracted by 3.5% in 2020 and the Federal Reserve expects it to climb 6.0% in 2021. With
fiscal stimulus in the rearview mirror and the Q3 spike in COVID cases, growth likely peaked in Q2.
Economic Update - Region One ESC- October 22nd, 2021 5
• Source: Bloomberg
Federal Reserve Economic Forecast
Atlanta Fed GDP Now Forecast
Real GDP YoY (Percent)
The Federal Reserve Bank of Atlanta's GDP Now index suggests U.S. gross domestic product
will expand 1.30% in the third quarter vs. consensus forecast of 4.80%
Economic Update - Region One ESC- October 22nd, 2021 6
• Source: Bloomberg
The Federal Reserve Dot Plot
FOMC Dot Plot – 09/22/21
The central bank’s rate-setting committee will keep its benchmark rate where it is near zero
“until labor-market conditions have reached levels consistent with the committee’s
assessments of maximum employment and inflation has risen to 2% and is on track to
moderately exceed 2% for some time.”
Economic Update - Region One ESC- October 22nd, 2021 7
• Source: Bloomberg
Economic Overview
Treasury Yields – 09/22/21 vs. 10/13/21
Yield (%)
Economic Update - Region One ESC- October 22nd, 2021 8
• Source: Bloomberg
Economic Overview
Inflation
6.0
5.0
4.0
Percent
3.0
2.0
1.0
0.0
-1.0
Sep-13
May-14
Jan-15
Sep-15
May-16
Jan-17
Sep-17
May-18
Jan-19
Sep-19
May-20
Jan-21
Sep-21
CPI Core PCE
Inflation is likely to accelerate as massive fiscal stimulus and accommodative monetary policy fuel
substantial economic growth. Will inflationary pressure from rising wages and manufacturing
bottlenecks prove to be “transitory” or more persistent?
Economic Update - Region One ESC- October 22nd, 2021 9
• Source: Bloomberg
Economic Overview
Inflation – Core Personal Consumption Expenditure (PCE) Index
Core PCE, one of the Fed’s primary gauge of inflation rose in August by the most on an annual
basis in three decades.
Economic Update - Region One ESC- October 22nd, 2021 10
• Source: BloombergEconomic Overview
Institute for Supply Management
66
64
62
60
58
Expansion
Survey Index
56
54
52
50
Contraction
48
46
44
42
40
Jun-18
Sep-18
Dec-18
Jun-19
Sep-19
Dec-19
Jun-20
Sep-20
Dec-20
Jun-21
Sep-21
Mar-18
Mar-19
Mar-20
Mar-21
ISM Manufacturing ISM Services
• ISM Manufacturing increased to 61.1 in September. Continued high backlog levels and labor
challenges continue to be major obstacles
• ISM Services increased to 61.9 in September. While demand remains robust, employers
struggle to find workers and materials shortages are restricting growth.
Economic Update - Region One ESC- October 22nd, 2021 11
• Source: BloombergEconomic Overview
Labor Market
Despite remarkable improvement in the Labor Market, non-farm payrolls remains 5M short of pre-
pandemic levels. The participation rate is also lower, possibly due to ongoing virus concerns,
family obligations and changing attitudes towards work.
Economic Update - Region One ESC- October 22nd, 2021 12
• Source: BloombergEconomic Overview
Help Wanted – Anyone Want a Job?
U.S. job openings rose to a fresh record high of 10.9M in July, illustrating the lingering staffing
shortages that are making it challenging for businesses to meet demand.
Economic Update - Region One ESC- October 22nd, 2021 13
• Source: BloombergEconomic Overview Economic Update - Region One ESC- October 22nd, 2021 14 • Source: Dallas Fed
Economic Overview Economic Update - Region One ESC- October 22nd, 2021 15 • Source: State of Texas Website
Economic Overview
Texas Employment
Economic Update - Region One ESC- October 22nd, 2021 16
• Source: State of Texas WebsiteEconomic Overview
South Texas Economic Overview
Economic Update - Region One ESC- October 22nd, 2021 17
• Source: https://myrgv.com/the-monitor/2021/08/29/a-new-texas-census-shows-shift-and-valley-may-suffer-for-it/
• U.S. CensusEconomic Overview
The Texas Freeze 2021 – Impact on South Texas
.
Economic Update - Region One ESC- October 22nd, 2021 18
• Sources: https://www.weather.gov/bro/2021event_februaryfreeze
https://www.thepacker.com/news/produce-crops/video-texas-growers-recount-devastating-crop-damage-recent-freezeEconomic Overview
Other Economic Issues in South Texas
The Positives
• Education
• Technology
• Expansion/new construction
The Challenges
• Water supply
• Aging Water System
• Border Issues
Economic Update - Region One ESC- October 22nd, 2021 19Economic Overview
Conclusions
1) The Fed has acknowledged stronger than anticipated growth and inflation due
to the speed and strength of the recovery.
2) The market remains concerned that the Fed is falling behind the inflation
curve as many price gauges continue to flash red.
3) Two months of sluggish job growth indicates a tug of war between employers
(starving for workers to meet demand) and candidates who have been slow to
return to the workforce.
4) The Fed’s decision to start tapering next month is partly about managing the
risk that it’s wrong in its belief that inflation is transitory.
5) The market expects the Fed to raise rates by the fall of 2022.
Economic Update - Region One ESC- October 22nd, 2021 20Headquarters
717 17th Street, Suite 1850
Denver, CO 80202
(855) 353-3954
info@publictrustadvisors.com
www.publictrustadvisors.com
Ash Mehta
Vice President, Investment Advisory Services
Let’s Connect
(480) 573-8980
ash.mehta@publictrustadvisors.com
Karen Proctor
Regional Director of Marketing, Texas Class
(214) 583-4224
karen.proctor@texasclass.com
21Disclosures
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