Before a dive into the third quarter gross domestic product (GDP) report (15:58), DoubleLine Portfolio Manager Jeff Mayberry and Quantitative Analyst Eric Dhall kick things off with a review of financial markets for Oct. 23-27. All sectors of the S&P 500 (1:00) ended in the red except utilities. Fixed income (2:37) experienced gains amid an 8-basis point decline in the yield of the 10-year Treasury. Commodities (4:50) were essentially flat, with industrial metals being the biggest winner. They next cover the week’s macro news (7:28), including PMI manufacturing and services reports, durable goods, jobless claims, personal income and PCE prints.
The 3Q GDP report (15:58), which came in at a surprisingly strong 4.9%, was “really driven by consumer spending,” Jeff notes. He cautions against reading a trend into GDP prints, given the significant volatility and noise around the variable. “It has big moves over time,” he says. “Just because we’re at 4.9% today doesn’t necessarily mean the economy is in the clear for the short term.”
For the Oct. 30-Nov. 3 week (25:29), Jeff and Eric will be on the lookout for the Employment Cost Index (an indicator often referenced by Fed Chair Jerome H. Powell), the August report of the S&P CoreLogic Case-Shiller house price index, ADP employment change report, JOLTS job openings, personal income and, of course, the outcome and guidance due Nov. 1 from the Federal Open Market Committee meeting and Powell’s news conference. As of Oct. 27, the federal funds futures market was pricing only a 2% chance of an in increase in the fed funds rate.
Jeff also (29:04) will be paying attention to the Treasury’s refinancing announcement on Monday Oct. 30. “Normally no one talks about it because it is what it is. But there are some inklings out there that given the increase in interest rates on the longer end of the curve, the Treasury’s going to issue more T-bills than they would have otherwise because they don’t want to flood the long-term Treasury market with more long-term Treasuries.”
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Mr. Mayberry joined DoubleLine in 2009. He is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives‐based and multi‐asset strategies. Mr. Mayberry is a Strategist on the Fixed Income Asset Allocation Committee and a contributing member on our Global Asset Allocation and Macro committees. He also co-hosts DoubleLine’s weekly Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcast. Prior to DoubleLine, Mr. Mayberry was a Senior Vice President at TCW for nine years within the Mortgage Group, where he specialized in portfolio and fund monitoring and analytics. He holds a B.S. in Engineering from Harvey Mudd College and an M.S. in Financial Engineering from the Peter F. Drucker Graduate School of Management at Claremont Graduate University.
Mr. Lau joined DoubleLine in 2009. He is a Strategist on the Fixed Income Asset Allocation (FIAA) Committee and a contributing member on the Global Asset Allocation and Macro Committees. Mr. Lau is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives-based and multi-asset strategies, including DoubleLine's Shiller Enhanced CAPE®, Shiller Enhanced International CAPE®, Real Estate and Income, and Multi-Asset Trend strategies. He also co-hosts the Sherman Show (Twitter @ShermanShowPod, ShermanShow@Doubleline.com) and Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcasts. Prior to DoubleLine, Mr. Lau was a Vice President at TCW where he worked under Jeffrey Gundlach as a Research Analyst in the Mortgage Group. He holds a B.S. from the University of Wisconsin, Madison and an MBA from the Marshall School of Business at the University of Southern California.