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Finance

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

The Trump Rally

For the third time in six months, markets reacted opposite to expectations.  First, it was Brexit.  Markets swooned after the unexpected vote.  That lasted for two days before markets shook off the surprise and headed higher.  Last month, when Trump won, the swoon lasted a whole 9 hours, and the tantrum ended just prior to the opening of U.S. markets.  On Sunday, December 4th, when Italy voted “no” on PM …Read More

China slowdown won’t send US economy into a dive

Since China devalued its currency in late August, the capital markets have become volatile. The markets clearly fear that contagion from China’s weakening economy could somehow infect the U.S., a theme that has been way overdone. Market volatility wasn’t helped when the Fed irrationally delayed its long anticipated rate rise in mid-September. China’s Growth Let’s first talk about China’s growth and its possible impact on the U.S. Over the past …Read More

Uncertainties driving the markets

Originally published on RGJ’s website, http://www.rgj.com/story/money/business/2015/03/20/uncertainties-driving-markets/25113763/ The financial markets have been focused on three uncertainties: the strong and rising value of the dollar vis a vis other currencies, weakening U.S. economic indicators, and the timing and magnitude of Fed policy actions. All this with a background of the ongoing Greek tragedy and continued political strife and terrorism worries. Volatility has resulted. The Strong Dollar The rising value of the dollar …Read More