A slew of new economic data

This week, we received a large amount of economic data, mostly pointing to underlying health. Consumer confidence came in at 108.7, the highest reading in 9 months. Job openings or JOLTS, declined to 7.44 million, less than expected, and the lowest level in 3.5 years. ADP employment came in at 233,000, significantly higher than expected. Gross Domestic Product (GDP), a direct measure of economic growth, came in at 2.8%, slightly lower than expected, but it was negatively affected by a larger-than-expected trade deficit. In the GDP report, it was revealed that consumer spending rose 3.7% on an annualized basis. Pending home sales came in at 7.4% monthly, spurred by lower mortgage rates. Later in the week, we saw the Fed’s preferred measure of inflation, PCE, come in at 2.1%, with core (which excludes food and energy) at 2.7%. Jobless claims came in lower than expected at 216,000, and the US employment cost index (ECI) was lower than expected at 0.8%. On Friday, we got the US employment report, which showed only 12,000 jobs created, much less than expected but heavily skewed by the hurricanes and the Boeing strike.

• Overall, the slew of data this week was positive
• The consumer continues to hang in there, and given roughly 70% of our economy is consumption-driven, very positive for growth
• In addition, inflation, at least as measured by the Fed’s favored reading, is within striking distance of its target
• On the flip side, the lower-than-expected JOLTS and payroll data were likely skewed by the hurricanes and strikes
• The economy this year has surprised most economists and prognosticators
• It seems the consumer, likely buoyed by all-time-high stock and housing prices, continues to spend
• What will be important to watch going forward is the labor market, as any softening would lead to weakness in spending

State of Florida reveals desire for Bitcoin exposure

The CFO of the State of Florida announced that they would be exploring adding Bitcoin to their overall investment funds. The CFO mentioned that Bitcoin is called “digital gold” and could help diversify the overall portfolio. This follows two other states that announced Bitcoin in their portfolios. In May, the State of Wisconsin Investment Board reported it had invested $164MM in several Bitcoin ETFs. Several months later, the State of Michigan Retirement System disclosed exposure to another Bitcoin ETF.

• It is important to note their holdings represent a very small fraction of their overall assets (0.1% for Wisconsin and .003% for Michigan)
• However, it is still a significant development for the emerging asset class as it continues to find broader adoption
• The CFO of Florida cited the Federal fiscal situation as one of the reasons that the state should be looking into adding the asset
• As long discussed here, the growing debt problem, which is exacerbated by the large fiscal deficits, could be ultimately negative for the value of the US dollar
• As the dollar weakens, it is generally positive for the value of gold
• Given one of the use cases for Bitcoin is said to be “digital gold,” it would make sense that some institutions begin to look to it as a way to diversify their US dollar exposure

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