Navigating Volatility: Tracking Credit Conditions, Job Growth, and India's Success

Last Edited by: LPL Research

Last Updated: February 08, 2024

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Jeffrey Roach:

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial, and I want to highlight a few important charts as we track how markets are working through the volatility in rates these days. First, credit is getting back into better balance. The latest Senior Loan Officer Survey tells investors that credit supply and credit demand are getting into better balance. Financial conditions eased in recent months as fewer banks tightened credit conditions in Q4. Favorable credit conditions suggest the economy has good momentum heading into the new year. Further, the upward revisions to job growth last year, we'll talk about that more later, support the solid momentum and markets are responding accordingly. Especially since this graph shows us we would normally experience recession when credit was this restricted. Second, job growth is healthier than originally reported. The government revised up 2023 payroll estimates indicating the economy is stronger momentum heading into 2024, and as a result, the likelihood of a rate cut was pushed out later into this year.

Jeffrey Roach:

As it relates to markets, good news was good news. Markets responded favorably to the latest labor market report. Even though the solid report pushed back the likelihood of a rate cut in March. The job market does hold the keys to future Fed policy, and overall, this tells us firms are in a good position to manage payroll and protect those profit margins. Third, India shines bright within emerging markets. Business sentiment was quite strong in January, suggesting this emerging market is an outlier within other emerging markets. Excluding China, India has the heaviest weight in emerging markets making up roughly 18% of your standard Emerging Market Index. India's PMI rose in January having its strongest reading since July. And in contrast, PMIs for Germany, France, the Eurozone, as an aggregate, all indicate shrinking business activity. We still favor domestic over emerging, but India's bright shining star is indeed worth tracking. Well, if you want more insights on global market trends, follow us on social media and take care.

 

LPL’s Chief Economist, Dr. Jeffrey Roach discusses the latest insights on global market trends, including improving credit conditions, stronger job growth, and India's outperformance in emerging markets.

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