On Wednesday the Federal Reserve (Fed) disclosed the minutes of the FOMC meeting which was held on the 16th of March. In actual fact there were no surprises that the market was unaware, however more detail of a re-assuring dovish tone was sustained.

The known factors were the recognition that the labor market conditions continued to improve and that gross domestic product was revised up, while industrial production figures increased and the real estate market continued to register some solid gains.

If we had to dig into the minutes per se and look for the unknown prior to Wednesday’s release, some interesting facts on the above known factors pop-out.

Looking at the labour market in detail it was interesting to get a clearer picture in terms of labor compensation figures and the employment cost index. Remarkably, the former increased by 2.5 per cent over four quarters in 2015, while the latter rose just below 2 per cent over the 12 months ending December 2015.

In addition, the average hourly earnings rate, which is considered as a very strong indicator in terms of the labor’s market health, increased by 2.25 per cent over the past 12-months ending February, thus a 0.25 per cent increase when comparing to the prior same comparable period.

Another interesting fact was the improvement in numbers within the Industrial production figures, with manufacturing output rising primarily due to the fact that the output for utilities increased as the demand for heating had rebounded following a warm December. Likewise broader indicators of manufacturing production pointed to modest gains.

In addition, interestingly enough was the registered growth in real personal consumption expenditure (PCE) which was up-ticked by a slight increase in energy services and the rate of sales of new light motor vehicles which stepped up following a decline in December. Disposable income also displayed some sort of support, as household wealth improved following the rebound in equity prices and increases in home prices.

Total U.S. consumer prices, which are measured by the PCE price index over the last 12-months ending in January, increased by 1.25 per cent, however one should highlight the fact that these were restrained by the declines registered in oil prices.

In fact, noting the same period core inflation which excludes energy and food prices increased by 1.75 per cent. Moving forward the analysis by one month to capture the month of February, consumer prices as measured by the consumer price index rose 1 percent, while core inflation hovered at the 2.25 per cent level.

Undoubtedly, the above factors indicate that yes the U.S. economy is recovering, but does this mean that the worst is over? Surely not. In my view the issue is now more of a global concern and in this regard the Fed fears that the timing of a rate hike is crucial for a continuing improving path. Companies are revising lower their outlooks for 2016 as the threat of a further deterioration in demand is still in play.

In addition, the Fed is also aware that a hike could strengthen the dollar which will surely impact emerging market countries. Thus when considering all the threats in place the Fed opted in maintaining a dovish stance.

Yesterday Yellen appeared on a panel with former Fed Chairs Ben Bernanke, Paul Volcker and Alan Greenspan at the International House in New York, in which the U.S. central bank heads discussed the U.S. economy and monetary policy around the globe. She maintained a similar tone in reiterating that the U.S. economy is healing and the path towards recovery is on the right direction, however global risks are still in place.

For the time being let’s continue to digest positively the improving U.S. labor market and hope for any factor sensitivity and earnings surprises in the coming days. That said possible upcoming macroeconomic threats should be given remarkable importance and asset allocation should be tweaked accordingly.

This article was issued by Jordan Portelli, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.