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Unemployment

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

As the Economy Stagnates, Equity Markets Pivot

Market volatility has marred the last few equity sessions.  The popular indexes all peaked on September 2nd, with the most closely watched S&P 500 down nearly -7% and the tech heavy Nasdaq nearly -10%.  But, don’t be fooled by the indexes.  Anyone with a diversified portfolio has likely had a significantly different experience in 2020. No doubt Q3 GDP will show a rebound of 30% or more.  Many believe that …Read More

The Real Story Of Employment Data

There were two separate events of economic  significance the week ended September 5th. First, the financial markets displayed volatility that hasn’t been seen for several months. The S&P 500 began the week at 3,508, rose 2.5% to 3,587 on Wednesday, fell -3.7% to 3,455 on Thursday, and after falling to an intraday low of 3,374 (-6.0% from Wednesday’s high) closed at 3,427 on Friday. On the week, the index lost …Read More

The Inflation Scare

Interest rates backed up last week.  The 30-year T-Bond, which was 1.19% on August 4, closed at 1.44% on Friday (August 14).  The 10-year T-Note closed at 0.71%.  It was 0.52% on August 4.  The CPI showed up with a +0.6% M/M rise (7.4% annual rate) for July.  That pushed the Y/Y rate to +1.0% from +0.6% in June.  Clothing prices rose +1.1% M/M in July.  They had risen +1.7% …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

Recessionary Impacts: ‘Down The Road’

When JPMorganChase reported earnings in mid-July, CEO Jamie Dimon quipped: “This is not a normal recession… the recessionary part of this you’re going to see down the road.” This observation is spot on. Dimon was observing that, while government had shut down much of the “nonessential” (i.e., 80%) economy, they also transferred $2.1 trillion to private households which more than made up for the $720+ billion of lost wages. We have seen many …Read More