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Tag Archives: inflation

“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

Hope is Not a Good Investment Strategy

According to the Bespoke Investment Group, every year, Wall Street analysts declare that the stock market will rise, and since 2000, the annual average forecast has been for a 9.5% gain.  The reality is that the market has only risen at a 3.9% rate over this time frame.  The 2008 forecast was for a market increase of 11%; the reality was -38%.  To say that Wall Street promotes the stock …Read More

Is Optimism a Key Ingredient in Economic Growth?

Most of the sentiment measuring surveys posted dramatically higher results after the election on optimism over what a Trump Administration might do for the economy. But, there is a big difference between hope and reality. Beginning in mid-December, the U.S. equity markets shifted into neutral, and have slowly drifted lower, perhaps waiting for the political changeover. The Fed is now in tightening mode. In my experience, the Fed tightens and …Read More

Does 2.3 percent economic growth justify Dow 20,000?

A survey of 53 economists by Blue Chip Economic Indicators forecast 2.3 percent economic growth for 2017, up from an estimated 1.6 percent in 2016. While better, 2.3 percent is still low by post-World War II standards. Consensus found that inflation would tick up to 2.4 percent, industrial production would begin to grow again (+1.6 percent) after stagnating in 2016, business investment (+2.7 percent) would finally be positive (after several …Read More

Are markets too exuberant?

Equity markets hit new highs during the Thanksgiving shortened week. Markets often move in anticipation of changes in policy. This post election market, however, appears to have instantaneously adjusted to what it perceives will be policy outcomes. Such outcomes, however, are by no means guaranteed; some outcomes may take several quarters, others years, if at all. This has been quite a stretch for markets where next month is considered “long-term.” There …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