Global CIO Commentary by Scott Minerd
The cold snap in the eastern United States is continuing into February and could have a dramatic impact on economic output. Interesting research from Bank of America shows that adverse weather could reduce first quarter economic growth by 1-2 percent. Our analysis below shows the negative effect of frigid Januaries on retail sales. The potential economic damage from storm after storm raises the prospect that the U.S. Federal Reserve could slow its pre-stated tapering course.
If we see real evidence of a U.S. economic slowdown, more liquidity from the Fed can be expected. Investors still have faith in the Fed’s ability to make further accommodations, as evidenced by how the U.S. stock market took last Friday’s tepid jobs report for January in stride. This development takes us back to the "Alice in Wonderland" world where bad news can be good news for stocks and bonds.
The near-term risk is to the downside for U.S. 10-year Treasury yields, which could fall from the current level of about 2.76 percent to closer to 2 percent. Not so long ago, at the end of December, the 10-year rose above 3 percent and many investors presumed rates would continue rising in a secular bear market for fixed income. How quickly things change.
Cold Weather Dampening U.S. Economic Activity
The effects of December’s frigid temperatures have already been seen in recent U.S. economic data releases. With January temperatures more than three degrees colder than average, it is likely that economic activity will continue to be depressed in the first month of the year. Retail sales show a particularly strong correlation with temperatures in January, suggesting that data for January will likely show restrained growth.
AVERAGE U.S. JANUARY TEMPERATURE AND JANUARY RETAIL SALES
Source: Haver, Guggenheim Investments. Data as of 1/31/2014.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
Investing involves risk, including the possible loss of principal.
*Assets under management is as of 9.30.2023 and includes leverage of $15.9bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
Guggenheim Investments. All rights reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.