Heritage Market Brief – April

Each month, our Heritage Investment team publishes a market brief to provide an overview of the major factors influencing the US economy, including a summary of key sectors and the current positives & challenges.

Click here for the April 2016 update.

Here are some key highlights:

POSITIVES

  • Core inflation, which excludes food and energy, recently reversed its downward trend as higher housing costs, health care expenses, and clothing prices drove inflation 40 basis points higher over the last six months to 1.7%
  • Labor markets continue to improve as March payroll employment rose 215,000, driven by construction, business & professional services, and retail
  • A 4%+ decline on the dollar index during the first quarter appears at least partially responsible for the recent boost in the ISM new orders index as new export orders surged 5.5 points
  • While the consumer savings rate of 5.4% is standing at a 3-year high, increasing consumer sentiment and confidence suggests this defensive behavior may reverse course

CHALLENGES

  • While oil prices gained 50%+ during the first quarter, the battle for market share and current inventories suggest low oil prices will likely remain; this is good for the typical U.S. consumer, but oil dependent economies will continue to face near-term pressure
  • Even with improving labor markets and increased inflation pressure, the Fed appears to be taking a slower pace to interest rate normalization as it remains cautious on spillover effects from global economic and financial uncertainty
  • A recent decline in vehicle sales of 5.1% to an annualized rate of 16.6 million may suggest that a weak March retail sales report is just around the corner