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equity market

The Recovery Will Be Weaker And It Will Take Longer

While markets were slightly higher on the week (see table), there was a clear rotation back toward technology after several weeks of a lull for that sector.  This is clearly shown by the week’s Nasdaq outperformance.   January 22 January 15 % Change DJIA 30,997 30,814 +0.6% Nasdaq 13,543 12,999 +4.2% S&P 500 3,841 3,768 +1.5% Markets continue to ignore economic reality and continue to be focused on a rosy …Read More

Inflation Expectations Rise Even as the Economy Cools

It has now become clear, and mainstream, that the economy weakened significantly in November, and that such weakness will carry forward to year’s end, at a minimum.  The weakness occurred primarily in the services sector as the virus’ resurgence caused some governors to mandate new or additional service business restrictions. As a result, jobless claims have spiked, travel and hotel occupancy fell to even lower levels, and restaurant and other …Read More

Mr. Market Won’t Let the Grinch-Like Economy Steal This Christmas!

The employment data for November were downbeat, and those surveys were taken prior to many newly imposed restrictions including stay-at-home orders. Other economic data, including Black Friday-Cyber Monday spending, and manufacturing and service indexes also disappointed.  Pessimism also showed up in the Fed’s recent Beige Book, its survey of business sentiment. Yet, despite all the downbeat economic news and forecasts, equity markets set new all-time highs the week ended December …Read More

The Recovery Stalls; Fed Pledges “Lower for Longer;” Equity Markets Pause

With the Fed pledging to keep rates low even when (or if) inflation rises above its 2% target, it is hard to see why long-term Treasury yields (and those of other quality issuers) won’t move toward yields of similar debt in the world’s other industrial economies (i.e., Europe and Japan). The economic lull is now showing up in both the labor market (Initial Claims) and in retail sales, likely because …Read More

Money Explodes; Gold Glitters; The Recovery Slows

I often get asked why the price of gold is rising, and, as a follow on, will it continue.  The price of gold has always had a significant correlation (80%) with the Fed’s balance sheet (i.e., the “money supply”), especially during periods of significant balance sheet expansion (money printing).  The table shows the Y/Y change in the money supply of the western world’s major economies.  The U.S., clearly the largest …Read More

On Reopening: We’ve Just Seen The Iceberg’s Tip

New Data Should Accelerate Re-Opening When the pandemic started, the only data available was the number of new cases, existing cases, and deaths. The original models, perhaps based on prior pandemics like the Spanish Flu of 1918, forecast significant deaths, up to as many as 2 million in the U.S., and, of course, mass infections. Based on that, governments all over the world shut-down their economies. New mortality data is now available …Read More