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“Normal,” It’s Not What You Think!

Most readers remember the pre-recession days of 4% GDP growth, interest rates at levels where savers had return choices worth pursuing (e.g., the 10 year T-Note at 4%), and workers could count on annual real wage growth.  Today, many refer to this as “normal,” and there is a desire, if not a movement, to return the economy back to such a state. You can see this in the political arena.  …Read More

2017 forecasts when Trump honeymoon ends

In this time of market exuberance and significant increases in almost every sentiment index, it is time to recognize that when reality returns, markets will correct. This coming year is going to begin with more uncertainty than is normally the case: The Trump fiscal agenda is huge, but so are the debt levels; and the Fed has begun a tightening cycle in earnest, with the economy still in first gear. Of …Read More

What ‘lower for longer’ means to yield-hungry investors

You’ve heard the expression, “We live in interesting times.” Substitute the words “uncertain,” “experimental,” or simply “scary” for “interesting,” and you will capture the feeling of many investors, especially those who have already retired or are approaching it. As I write, the media tells me that, by almost any standard measure, equity valuations are too high. For example, trailing PE ratios are 20x, 5 points above the historical mean. To …Read More

The imagined recession disappears

And POOF, just like that, the imagined recession disappeared! The equity market rallied from its Feb. 11 low (S&P 500 1829.08, down 10.5 percent for the year) to 1893.40 (March 3) and rising as I write. Amazingly, the markets are now only down about 2.0 percent for the year. This bounce is a relief. And with positive economic data of late (242,000 new jobs in February), the odds of that …Read More

CPI Says “Deflation,” But U.S. Households Face Inflation

Angst exists in the capital markets over the “deflation” issue. Basically, the markets are worried about a lack of demand which forces prices down, causes consumers to wait longer for the prices to fall further before they purchase, and ends up in a downward price spiral which leads to recession or worse. I’ve read plenty of this lately. This is simply not the case. Oil prices are a result of …Read More

Financial media fixated on threat of deflation

Originally published on Reno Gazette Journal’s website, http://www.rgj.com/story/money/business/2015/02/06/financial-media-fixated-threat-deflation/23010819/ As a financial markets economist, my job is to survey the economic landscape and identify trends and issues that might have a significant impact on economic activity (and then to worry about what those trends and issues mean for client portfolios). Normally, over the intermediate time horizon, such economic trends manifest themselves in financial asset prices. But that is not true in …Read More