The latest expression at the Fed is “Residual Seasonality”. This week saw two competing Fed studies with differing interpretations of the effects of seasonality on the 2015 1st quarter GDP (which was an anemic 0.2%). How much was it affected by harsh weather and other “idiosyncratic factors”? The San Francisco Fed issued a study (using algorithms and historical data) that indicated 1st Quarter GDP grew at a 1.8% after seasonal “adjustments”. However, the Washington DC Fed office issued a study last week indicating that seasonal adjustments are not warranted. So both hawks and doves at the Fed have “cover” for their positions. Regardless, it puts the spotlight on 2nd Quarter economic data, “unfettered” by weather. Today’s release of Fed minutes took a June rate increase off the table, but investors are now not sure about September. The futures markets probability is now weighted to October, December or January. Meanwhile, a major investment bank research paper cautioned that waiting too long could result in volatile and swift increases in bond yields. The 10 year closed today at 2.25%, trading in a tight range between 2.15% and 2.30% in the past weeks. ….stay tuned… David R. Pascale, Jr.
