Fed Chair Powell’s congressional testimony did little to allay market fears regarding the Fed’s underlying posture. Markets continue to be worried that, while the Fed is certain to cut the Fed Funds rate by 25 bps at July’s meeting, the rate reduction may turn out to be just an “insurance” cut, especially in light of the fact that the June jobs report has been portrayed as “strong.” Describing the cut …Read More
Market Hopes: An Easy Fed; End Of Trade Wars. So Far, Neither One Has Happened.
The “expected” scenario, a resumption of trade talks, is what emerged from the G20 meetings. The best the agreement between Presidents Trump and Xi did was to temporarily reduce the specter of further growth killing tariffs. We still have the existing ones that have significantly slowed world trade, created a “soft patch” in the U.S.’s economy, and contributed to the emerging recessions in Europe and China. Capital spending growth is …Read More
Key Indicators Have Peaked; Markets Hope for Soft Landing
The National Bureau of Economic Research (NBER), a private sector company, is the entity responsible for officially labeling recession start and end dates. As a rule of thumb, the financial markets use two consecutive quarters of negative GDP growth as the marker. But, that is not the way the NBER sees it. According to their website, the NBER defines a recession as: “a significant decline in economic activity … lasting more than …Read More
5/7/2019 It’s Not the Economy – It’s Buy-Backs
There were three significant economic events since my last column: the GDP report, the Fed meeting, and the unemployment report. GDP The Q1 real GDP growth rate (3.2% annualized) surprised nearly everyone to the upside. And, of course, Wall Street characterized the headline number as proof that the “soft patch” had passed. Never mind the details. Of the 3.2% growth, nearly .7 percentage points came from inventory growth. This was …Read More
4/10/2019 Equity Market Appears to be Moving to the Sound of Its Own Drummer
There were several recent market moving reports, including some positive data on U.S. and Chinese manufacturing. But, the biggest news was the seemingly positive March employment data which sent equity markets up, as the initial take on the headline Establishment Survey (ES) data (+196k) fit the narrative that the soft economic patch is now passing and a recession will be avoided. Because it doesn’t fit the narrative, there has been …Read More
Major Economic Trends: All Downbeat
The business cycle still exists no matter what the folks on TV or the politicians say. The major economic trends continue to weaken. Yield Curve Inversion Bond yields have fallen dramatically recently. The equity markets reflect nervousness. The yield curve is now inverted to the rates “administered” by the monetary authority. The Fed Funds rate is pegged near 2.4% versus the 10-year T-Note yield which stands near 2.1% as of …Read More
