This week, there were two things that warranted comment. The first was the inflation reports, and the second was the debt ceiling. Let’s take a closer look. 

My colleague Sam Millette, director, fixed income on Commonwealth’s Investment Management and Research team, helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam! Let’s take a closer look.

After moderate gains in March, markets continued to rally in April. U.S. markets were up by low single digits, while bond markets were moderately positive. International markets were mixed, with developed markets showing modest gains while emerging markets ticked down. Given the downbeat expectations for earnings at the start of the month, the gains may be a positive sign for the next several months.

Each week, we break down the latest U.S. economic reports, including what the results mean for the overall health of the economy. Here, you will find how economists’ forecasts compare with actual results, key takeaways to consider, as well as a list of what’s on tap for the week ahead. 

Once again, we are about to get the monthly jobs report, which comes out tomorrow. As with every month, this is one of—if not the—biggest economic reports. For the economy, more jobs are good: more workers, more wage income, more spending ability, and so forth. No real downside. But for financial markets? A strong report can be problematic. Those workers—earning and spending their wages—add to demand, which adds to inflation. With the economy slowing and with the Fed suggesting yesterday that it may pause rate increases, tomorrow’s report is especially timely. 

The big economic story today will be the end of the regular meeting of the Fed and what it decides to do about interest rates. Markets are expecting a 25 bp increase, to a range of 5 percent to 5.25 percent, with a slight bet on no hike at all. This is the baseline that the commentariat will be reacting to once the news comes out this afternoon. 

After a strong March, financial markets were mixed in April. U.S. markets were up by low single digits, bond markets showed small gains, but emerging markets pulled back. Concerns around inflation and the banking crisis lingered, contributing to the uncertainty about the Fed’s next move. Still, job growth remained at a healthy level, consumer confidence was up, and earnings data beat expectations.

Each week, we break down the latest U.S. economic reports, including what the results mean for the overall health of the economy. Here, you will find how economists’ forecasts compare with actual results, key takeaways to consider, as well as a list of what’s on tap for the week ahead. 

Each week, we break down the latest U.S. economic reports, including what the results mean for the overall health of the economy. Here, you will find how economists’ forecasts compare with actual results, key takeaways to consider, as well as a list of what’s on tap for the week ahead. 

Recently, we have talked about a bunch of headline issues that are not real problems. Today, I want to discuss something that could be a real problem: the pending debt ceiling confrontation. This issue is one we need to understand and pay attention to. But as we will see, once again, it is also likely that the outcomes won’t be nearly as bad as the headlines suggest. It is something to watch but not something to panic about.