Economic Signals from The Exchange

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October-November 2013

In this issue, we examine how the well-documented struggles of the U.S. labor
market are impacting two key drivers of economic growth.

  • Disposable Personal Income
  • Personal consumption
  • Household wealth

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Summer 2013

In this issue, we observe recent trends in inflation. By its simplest definition, inflation is the combined rate at which prices for goods and services are rising while purchasing power is falling. Inflation distorts the price mechanism upon which the economy depends to allocate goods and services.

Measuring the rate of inflation is complex, drawing on factors such as domestic demand for goods and services, currency fluctuations, the international trade market, and interest rates.

To assess some of these factors, we examine various index measurements. For domestic inflation, we turn to the consumer and producer price indexes. For international trade, we consult import and export prices. Finally, to understand the market’s calculation of inflation, we look at U.S. Treasury bonds.

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May June 2013 Screenshot

May - June 2013

In this issue, we consider the market’s reaction to the possibility that the record-low interest rates offered on U.S. Treasury bonds may begin to rise. The Federal Reserve’s Treasury securities purchasing plan has recently lowered interest rates and impacted other asset classes such as equities and commodities, including gold.

The Fed has not announced any firm plans to taper their purchasing of Treasury securities. However, this has not deterred investors from reacting to the possibility. As investors have begun to anticipate rising interest rates, equity and gold price have started to retreat and the pace of U.S. IPOs has slowed.

Lower interest rates have also indirectly influenced the IPO market by affecting the price of equities. Read More »



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March - April 2013

In this issue we examine the state of the U.S. IPO market. We focus on issues that influence companies that wish to go public such as the performance of the stock market, trends in volatility, and certain provisions of the JOBS Act.

History suggests that negative trends in the stock market and spikes in volatility stifle the IPO pipeline due to hesitation and concern about future market conditions. A steadily growing market, much like the one we see today, creates a more stable environment for IPOs. Read More »


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February 2013


In this issue we examine the rapid growth of exchange traded products (ETPs) with a focus on the characteristics which offer investors alternatives to traditional mutual funds.

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January 2013

As we head into 2013, we examine the state of the U.S. housing recovery and its impacts on the stock market and consumer spending.

In late 2007, the U.S. housing market began to collapse and the U.S. financial crisis and recession quickly followed. Recently, the news has been far less bleak. Mortgage delinquency rates are at post-crisis lows and home prices are rising in a record number of metropolitan areas.

The stock market is also signaling a steadily improving outlook for housing with homebuilder stocks performing well since February 2009. An added economic boost from improving home prices is likely to occur as consumers replace aging household durables with new furnishings either as part of a move or a makeover of their current homes.

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2012 Issues

November - December


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November-December 2012

In this issue, we examine an unfamiliar divergence between recent market performance and the level of volatility in the market. We assess investors’ “flight to safety” which underscores the importance of the policy decisions pending in the next few months.

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October 2012

In this issue, we examine the relationship between the equities market and the economy as well as its recent divergence from historical norms. We focus on the Philadelphia Fed Manufacturing Index which is calculated from a monthly survey of manufacturers conducted by the Federal Reserve Bank of Philadelphia. We break out the sectors of the S&P 500 to assess which drove the recent rally and conclude with an update on the state of the U.S. IPO market. 

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August 2012


In this issue, we take a look at the history, evolution, and growing popularity of exchange traded products (ETPs) and how they fit into investors’ portfolios.

  • The first domestic ETP was an exchange traded fund (ETF), the Standard & Poor’s Depository Receipts (SPDRs). It was created in 1993 and designed to track the S&P 500. ETP growth through the rest of the 1990s was relatively slow. By 2000 there were 95 U.S. ETPs and 7,596 U.S.-listed companies.
  • In the 2000s, the popularity of ETPs exploded. As of July 2012, there are almost 1,500 U.S. ETPs that trade on today’s stock exchanges while the number of listed companies has decreased to 4,964.
  • Over the years, ETPs have expanded from just tracking U.S. stock indexes to tracking global markets, commodities, fixed income, and currency.
  • This vast spectrum of investment opportunities has attracted not jus institutional investors and arbitragers, but the retail customer. Through ETPs, the retail investor has an easy, affordable, and efficient way to create a diverse portfolio.
  • The ETP market continues to grow due to the demand for these customized and accessible investment products.

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July 2012

In this issue, we take a look at the relationship between investors’ actions and recent trends in average daily volume and volatility.

  • While market volume and volatility have declined overall since the financial crisis, retail trading has not experienced the same decline.
  • Trading activity by retail customers of online brokerages has risen since the financial crisis.
  • Trading by retail investors does not necessarily mean that investors are bullish on the market since investor trades can represent buying or selling activity.
  • From other indicators we conclude that investors are bearish on the equity market.
  • Equity mutual fund flows show that for the most part, investors have left the market, particularly in 2011.
  • The view that investors are leaving the market is supported by weakening investor confidence, which is currently close to levels last seen during the financial crisis.

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May 2012

In this issue, we take a look at the recent trends affecting the consumer such
as payments on financial obligations, the saving rate, and consumer spending.

  • After a run-up during the late 1990s and early 2000s, payments on household financial obligations are starting to fall back in line with historic averages.
  • This is due in large part to deleveraging as consumers reduced debt significantly in the first few years following the recession.
  • The saving rate – the share of income left over after spending and taxes – has been falling since mid-2010 even as total paychecks for Americans have been rising.
  • To date, inconsistent confidence has not stopped consumers from spending, particularly on durable goods.
  • The markets have reflected this increase in spending, as consumer discretionary stocks have outperformed the S&P 500 since the recession.

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April 2012

In this issue, we take a look at recent trends in corporate and investor

  • The recently passed JOBS Act has put the spotlight on the U.S. IPO market. The pace of IPOs is starting strong in 2012. We will pay close attention to IPOs over the coming months.
  • Corporate profits, a positive post-recession growth story, continued to climb in 2011.
  • The U.S. markets were encouraged by a 5-year high in company dividend increases and an all-time record dividend dollar payout of $24.2B for the first quarter.
  • Despite the gains in the stock market, investors remain hesitant to return to equities investment. Equity mutual fund flows were negative in each month of Q1-2012, a pattern consistent with the latter half of 2011.

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March 2012

In this issue, we take a look at how consumers are managing the portion of their savings devoted to investing.

  • The U.S. personal saving rate has remained elevated above pre-crisis levels, ranging from 4-6% during the recovery as investors avoid risk.
  • Mutual fund investment has seen a strong pullback from the riskier equity asset class, with investors instead preferring bonds, an asset less sensitive to the business cycle and one that has outperformed equities over the past decade.
  • The decline in the State Street Investor Confidence Index® shows that institutional investors’ attitude towards risk has become progressively more conservative since 2002.
  • Newly launched exchange-traded products have outpaced IPOs for the past five years, indicating that investors prefer financial instruments with a customizable balance of risk and return.
  • After its strongest five month run since the recession, consumer confidence was virtually unchanged in February.

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February 2012

In this issue, we will take a look at financial factors affecting consumer behavior.

  • Consumer demand is strong. Consumer spending on services, nondurable goods, and most recently durable goods now exceeds pre-recession levels.
  • Mirroring the strength in consumer demand, consumer discretionary stocks have outperformed the market by 48% since 2009.
  • With consumers’ financial obligations tying up the smallest percentage of income since the 1990s, more dollars are available for spending.
  • The employment to population ratio has been stable for over 18 months, suggesting an improving employment outlook.
  • In August 2011 consumer confidence started its most positive run since before the recession began.

Read the Issue (PDF, 88kb)