Parsing the Data

Last week’s disappointing US GDP report indicating 1.2% annual growth rate is giving more credence to the “secular stagnation” theory of post crisis economic growth. It definitely seems to have pushed a Fed rate hike past the election, although this Friday’s jobs report will be closely watched. The Fed’s favorite inflation gauge, PCE (Personal Consumption Expenditures) remained at 1.6%, well below the 2.0% Fed target. Recent statements by Fed officials indicate a “one and done” rate hike for 2016, December being the most likely and politically expedient date. CMBS spreads continue to rally as the latest new issue featured AAA bonds at Swap + 108 (compared to Swap + 175 during the volatility early in the year), the “perfect storm” of low treasuries and tight spreads continues. Stay tuned

David R. Pascale, Jr.