Happy Easter Week to you and yours.

Markets are closed tomorrow for the holiday and we hope you all enjoy your Spring Break!

Fed Chatter

We have seen an increased level of chatter from Fed officials in recent days as they try too hard once again to direct perception. What happened to the gold ole’ days where we did not have all the “transparency”? I vote for going back to same. The last thing the market participants need with such frazzled nerves is more data, innuendo and chatter from which they then take a guess at its meaning.

The Fed’s inflation outlook eased between the December and March FOMC meetings. FOMC officials have often said that below-target inflation is a major reason for slowing the pace of normalizing monetary policy. Though the March meeting was just a week ago and there hasn’t been any inflation data since then, a few Fed officials seem to be turning more hawkish on inflation already!

While the talk focused again on rate hikes – a topic we cannot seem to get too far away from – the data in some areas of the US is improving. That is a positive long-term though I still think we are in for more churn short-term.

There will be plenty of material for the short-term trading network and media to fret over as the next earnings season arrives.

US Economy suddenly on the Fast Track?

Surprise, surprise: As we have suggested in recent notes here, a few recent economic indicators suggest that the US economy could be turning for the better after a lengthy rest-stop. That would be a very big surprise indeed given all the recession fears at the year’s start.

Consider the following:

Record tonnage.

Dr. Ed tells us that February was a superior month for truck tonnage. The American Truck Associations’ measure soared 7.2% m/m and 8.6% y/y. May be important to note that the index has been a good indicator of the broader economy since trucks account for 69% of tonnage carried by all carriers. This reading puts it at a new record high!

As one might expect, there was caution poured all over this data as God forbid, someone might think it was good news. ATA’s Chief Economist Bob Costello cautioned: “The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February.” The result was a big seasonally adjusted gain. Costello also cited inventory overhangs as a reason he’s waiting to see March’s data before getting too excited.

That may explain the bounce in the short-term, but the new record high?

Coast to coast.

What are trucks hauling? Imports have surged recently at the West Coast ports. Inbound traffic of 20-foot equivalent containers made a good showing during February, jumping 8.6% y/y based on its 12-month moving sum. Of course, a year ago imports were depressed some by strikes at the ports.

Regional factory “mini-boom”.

As we covered in yesterday’s notes, the most recent manufacturing business survey results came in strong for three of the earliest reporting Fed districts: New York, Philadelphia, and Richmond. The average of their composite manufacturing indexes shot straight up from -7.8 in February to 11.7 this month, the highest since November 2014.

Of the contributing components, new orders and shipments rose sharply, while employment readings were steady to slightly positive.

A Word From Scotland!

Our good friends and colleagues in Scotland run a great ship over at Alan Steel Asset Management. Alan always has great wisdom in his writings…here is one pasted in from a couple days ago – should be timely as we step forward:

“In the 43 years since I became and IFA, I have never known a client who:

1. Sold out of the stock market because of widespread fear and then,

2. Got back in AFTER it had dropped.

All of them have said: “I’ll buy in again when it’s better.”

But the real world translation is that they were selling low and buying high…and that ticket to ride offers no thrills and plenty of heartache.

And when they did panic sell it was usually thanks to headline hysteria; those fear-laden scribblings that are more often than not written by young journalists with no money (or experience of same) themselves.

So it comes as little surprise why for 25 years in the U.S., Dalbar statistics show average investors consistently under-perform their Indices by 4% to 6% per annum….”

Alan stuff is always enlightening!

Fretting Increased

In the end, we likely need to remain aware of the resistance noted over the last week after the run of the last few weeks. It would be normal to see some pullback and hence a bit of giveback over the short-term.

Keep in mind, many will “prepare” for an ugly quarterly reporting season as covered above. I have stated we can expect two more before the round trip is made on most of the energy sector setback. Afterward, “comps” will begin to improve as they will be based on year-ago levels which were just terrible.

While we have had a nice bounce, I still have a gut feeling we have a bit more chop ahead. That means we keep our patience and discipline on adding to areas of value as the fear ramps up a bit and earnings flow in.

Lastly, consider this: there is a bigger picture at work that we need to keep as the backdrop in our planning. As stated a few times in recent notes:

Forget economics for a moment and think demographics.

If we can patiently do so, and use periods of setback to our advantage for the long-term, we will find we are in great shape.

Happy Easter to You and Yours….see ya next week.