Posted on 04/14/2023 at 08:17 AM
Posted on 01/17/2023 at 02:49 PM
Posted on 10/10/2022 at 10:10 AM
Posted on 07/15/2022 at 02:57 PM
The first quarter was impacted by a hawkish Federal Reserve, a war in Ukraine, global supply shocks causing rampant inflation, and global risks intensifying.
The Federal Reserve’s tightening cycle is now fully underway, with the futures market predicting as many as 5 more rate hikes this year following a one-quarter point rake hike on March 15th. The Fed is tightening monetary conditions into a U.S. slowdown, which is quite the contrary of what happened between 2016 and 2018.
Furthermore, the Fed announced an end to their “quantitative easing” program, which means that they will be draining $95 billion of assets from their balance sheet every month starting in May and reachin...
Read morePosted on 04/20/2022 at 09:22 AM
Posted on 01/31/2022 at 02:43 PM
Posted on 10/22/2021 at 08:23 AM
The predominant theme in the second quarter was inflationary pressure in the financial markets, and how this might impact the Federal Reserve’s policy decisions on interest rates. The inflation rate in May was 5% compared with a year earlier. Year-on Year price increases in almost all commodities have been very elevated, evidenced by the copper market (+51%), wheat (up 21%), US median home prices (up 23%), and oil (up over 50% this year).
The Federal Reserve believes that this inflation is transitory, and appears elevated due to the “look-back” effect, i.e., the fact that the basis of comparison was so low last March, April, and May.
In June, the Fed raised its expectations f...
Read morePosted on 07/09/2021 at 02:01 PM
The US savings rate is very elevated at 13.6%, compared with a pre-Covid average of 6% since 2000. Americans have been saving during the pandemic at an unprecedented rate; as the pandemic abates, they will begin spending with pent up demand. This, combined with a rapidly recovering economy, an unprecedented increase in money supply, a Federal Reserve which seems committed to unlimited economic stimulus, ever expanding fiscal stimulus from the government, and a new sense of optimism about a successful vaccination program are keeping spirits high in the stock market.
The Fed has repeatedly committed to keeping the overnight Fed funds rate low, and there has been an unprecedented increase in the...
Read morePosted on 04/04/2021 at 09:00 PM
One year ago, GDP growth was expected to be 4.8%. Instead, it’s now projected for 2020 at -4%, the largest drop in modern history. Simultaneously, world stock markets increased in value from $80 trillion to $100 trillion even as S&P earnings per share dropped by 15% last year.
This strange stock market behavior can be explained by the sheer size of the stimulus thrown at the Covid-19 crisis. Essentially, the Fed threw $4.5 trillion at the $300 billion problem of lost Covid-19 wages. The enormity of this government stimulus overcame any economic downturn, uncertainty, or political tension. Another $1.9 trillion of stimulus was announced last week by president elect Biden. Two other facto...
Read morePosted on 01/18/2021 at 09:00 PM
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