Executive Summary The Fed’s response to the 2008 Financial Crisis initiated programs which grew their balance  sheet from $900 billion to $4.5 trillion by 2014. In 2018 the Fed began reversing course and  reducing their balance sheet. However, by mid-2019 markets and the economy were showing  weakness [...]

Executive Summary This week’s newsletter will be abbreviated as is the Labor Day work week. The inverted yield curve, which has preceded most recessions, seems to be indicating recession (see first graph). Two consecutive quarters of negative GDP is generally accepted as a recession. However, in 2022 [...]

Executive Summary With mortgage interest rates soaring, many people expected a sudden drop in home prices. The data shows the quantity of homes sold has decreased significantly (see first graph). Yet, according to the Zillow Home Value Index, home values have risen back to new highs (second [...]

Executive Summary Prior to the pandemic, household savings were trending upward and then spiked with multiple rounds of government stimulus money (see green in first graph). In 2022, the savings drawdown accelerated (see red in first graph). A study by the San Francisco Federal Reserve estimates at [...]

Executive Summary Fitch, one of the three largest credit rating agencies, recently downgraded the U.S. debt rating from AAA to AA+ because the debt-to-GDP ratio is projected to reach over 118% by 2025. This ratio of debt is way out of line of a AAA rating, which [...]

Executive Summary Since the Federal Reserve Bank raised the Federal Funds Rate to 5.25%, the 30-year fixed mortgage rate has jumped to 7.46% (see second graph) – over double the pre-pandemic rate. At the same time, home prices have only dropped between .9%-2.3% (3rd graph) according to [...]

Executive Summary Most U.S. businesses use debt to maintain operations. The first graph shows how banks are tightening lending standards compared to the concurrent rise in prime interest rates on loans moving from 3.25% to 8.5%. Revolving debt outstanding is around $1 trillion. These loans normally contain [...]

Executive Summary John Hussman, Ph.D., economist, market analyst and fund manager, provides some of the best market analyses in the industry. He is renowned for using actual historical occurrences in assessing the validity of valuation methodologies and identifying market syndromes. He gained recognition by accurately predicting the [...]

Executive Summary The Fed is now implementing Quantitative Tightening (QT), thereby reducing the size of their balance sheet. They are also increasing interest rates, which will reduce liquidity through a drop in loan demand. Loan demand will be hurt both by higher interest rates as well as [...]

Executive Summary When short-term interest rates are higher than long-term interest rates, the curve is considered inverted. Typically, this occurs just prior to or during recessions. In the first graph below, one can see the curve has not been this inverted in 40 years. Additionally, leading economic [...]