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Macroeconomic & Geopolitical

Still Generally Positive in the U.S. But Your Mileage May Vary

19 July 2019 - 4 min read

The three things you need to know this week: Fed's Beige Book is out, the ECB ponders moving its inflation goalposts and S&P 500 earnings start trickling in


Fed Beige Book: The report noted continued modest economic expansion with a generally positive outlook despite widespread concern about trade-related uncertainty. Many districts saw slight increases to retail sales and expect employment to continue to grow, although at a more modest pace. Inflation pressures appear to remain contained. Despite continued labor market strength, companies are still struggling to pass on higher wages and new tariffs to customers. The report noted the ability to pass on these cost increases to final prices was restrained by brisk competition.

ECB Moving Inflation Goalposts?: Reports suggest the ECB is studying a potential change to its inflation target. The current mandate of targeting inflation “below, but close to 2%” is being analyzed to determine if it is still appropriate. The goal would be to transition to a more symmetrical approach to allow flexibility above or below the 2% target level. This would enable the ECB to remain lower for longer in an effort to boost inflation beyond 2% and remain above that level for a time to ensure the 2% target becomes entrenched.

Earnings Update: Bloomberg data shows 13% of the S&P 500 reported earnings with revenues up 2% Y/Y and earnings .7% higher Y/Y. Relative to expectations, sales are in line while earnings have surprised to the upside by 4.1%. 15% of the companies that report in the current season for the Stoxx 600 have announced results, with sales up 6.4% Y/Y and earnings up 7.8% Y/Y. So far, sales are 7.7% below expectations and earnings are 3% above.


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