Executive Summary In March of this year the Fed began increasing short-term interest rates. Typically, they do not start rate tightening when consumer sentiment is plummeting (see first graph). At the same time, the Fed usually does not also hold rates so low when inflation is so high [...]
Executive Summary In a healthy economy, long-term interest rates are higher than short-term rates (see first graph). However, when short-term rates are higher than long-term rates (inverted yield curve), it has typically been a precursor to a recession (see third graph). Most people have recognized steep inflation [...]
Executive Summary This week I wanted to share a guest article from John Mauldin. This article is reflecting on the trends that we are seeing popping up that resemble markets of years past. John begins his take by saying, "The Strange Recession we are now entering is [...]
Executive Summary Markets have been reacting significantly on every news headline regarding the Russian/Ukrainian war. The sanctions and supply disruptions could last long past any potential peace deal. Also, the equity markets were selling off this year before the war started as inflation was rising (see first [...]
Executive Summary As discussed in previous newsletters, economic growth is slowing. The Atlanta Fed GDPNow model reduced the first quarter GDP growth estimate to 0.0% from the previously reported .6% estimate. Now with Russia invading Ukraine, the effects of war could further negatively impact growth. Gas prices [...]
Executive Summary The current real GDP estimate from the Atlanta Fed’s GDPNow model for first quarter 2022 is 0.6%, which is a 6.4% drop from fourth quarter 2021. During 2020 and 2021 government stimulus money increased household’s disposable personal incomes, which resulted in their spending more, saving [...]
Executive Summary Multiple expansion means investors pay more per dollar of corporate earnings for a share of stock. The opposite would be the contraction or reduction in stock prices per dollar of corporate earnings. Multiple expansion results in overvaluation in stock prices from their long-term mean. One [...]
Executive Summary The Federal Reserve Bank (Fed) has two mandates: maximum employment and stable prices. However, their addition of a third unwritten mandate – propping up financial markets – has paralyzed them from addressing the current exorbitant price instability – or inflation. From 1970 to present, the [...]
Executive Summary Last week U.S. Federal debt surpassed $30 trillion! While notable, the more alarming fact is the rate of change since 2007 when it was under $10 trillion. Government programs designed to save the U.S. economy from the 2008 Financial Crisis and the 2020 Covid Pandemic [...]
Executive Summary For the month-to-date period ending January 24, 2022, the stock market indices have retreated from their highs while the Vix has been increasing. In December of 2021 I wrote when the Vix is above 20 market risk is building, and when it crosses 30 volatility [...]