In my youth, I served in the U.S. Navy as a Yeoman in an Anti-Submarine Warfare squadron. After being addressed by a senior officer, the officer would end the conversation with the words “Carry On.” For those who haven’t served in the military, this phrase means what it sounds like – you are permitted to “carry on” with your business.
The world’s economy and stock market was surrounded by news this past week, but by the end of the week, the only thing I could think of is … “carry on.” Nothing occurred that altered my view of the economy or markets. The more meaningful economic events of the week are summarized below.
- Mario Draghi, President of the European Central Bank, cut the overnight rate the ECB pays for deposits from banks to -0.1%. In other words, the ECB will now charge banks to keep deposits at the ECB. This is an attempt to get banks to actually loan money to creditworthy borrowers rather than sit on deposits. Additionally, the ECB cut its main refinancing rate to 0.15%. Europe is slowly clawing its way out of recession. The Euro-Area economy grew by a whopping 0.8% during the first quarter of this year. That is an improvement from last year’s -0.4% growth and better than the -1.0% growth the United States generated during the first quarter of the year. We anticipate that Europe will show some degree of economic acceleration this year – probably not exceeding 1.5% overall growth. Sorry, Mario the “stuff” the central bank can do primarily generates higher asset prices and wealth, but does little to help the overall economy – just ask Ben Bernanke or Janet Yellen. They have been actively pumping monetary policy to little effect in the United States over the past year.
- The Bureau of Labor Statistics (BLS) reported that the U.S. economy added 217,000 jobs in the month of May, as the unemployment rate held steady at 6.3%. The headline trumpeted that the U.S. economy has generated enough new jobs to offset the jobs lost during the 2008-2009 Great Recession. Good news, until one understands that through overall demographic growth, the U.S. employment base grew from 153.1 million at the beginning of the recession to 155.6 million today. That leaves 2.5 million more unemployed than was the case seven years ago.
- The world’s stock markets continued to grind higher during the week – nothing new here. The S&P 500 index rose by 1.4% during the week. The iShares MSCI ACWI ETF (global stock markets ETF) rose by a similar 1.4%.
- Interest rates remain low. The 10-year Treasury note yielded 2.60% at Friday’s close, up from 2.48% the week before. No real change of note here.
While few economic or capital market developments occurred this past week, something very meaningful occurred 70 years ago this past weekend. Of course, I’m talking about the Allied powers’ invasion of Normandy in June 1944. Free people the world over should pay homage to these great men. They saved the world from the fascist stranglehold. They helped save the world for democracy.
Most of the survivors of the Normandy invasion are gone. The celebration in Normandy this past weekend will be the last reunion of the gallant heroes – the survivors of the greatest invasion conducted by members of the Greatest Generation. Our nation should be proud of all who served.
So until next week, carry on.
