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FOMO, Momentum, The Fed, But No Fundamentals

As of this writing, the equity markets are on a three-day losing streak, caused by less optimism on the “trade war” file. And, while there were some positives in recently released economic data, most major economic indicators continue to show business contraction. The equity market has been driven by “the economy is strong” narrative, FOMO (Fear of Missing Out), momentum, and the injection of huge amounts of liquidity by the Fed (QE4). Unfortunately, …Read More

A Full-Employment Recession: Post-WWII Growth Model Flawed

There were three big interrelated economic events at the end of October. We had the first pass at Q3 GDP, followed by the Fed meeting (another reduction in the Fed Funds Rate), and the week ended with a much stronger than anticipated jobs report. The data continue to imply that the traditionally accepted post-WWII growth model (emphasis on positive aggregate GDP growth) is no longer applicable, and policies based on it …Read More

The Goldilocks Labor Report: “Just Right!”

It isn’t ever a good sign when markets become manic. August was quite volatile with five days out of 22 (23%) where the S&P 500 intra-day market swings exceeded 2%, and three days when the market closed down more than -2.5% from the prior day’s close. (We haven’t seen such price volatility since 2011!) While, so far, September has been less volatile, the market is still susceptible to tweets. For example, news about the …Read More

The Deer in the Headlights

The big event of August, the one that was going to move markets, was supposed to be Jay Powell’s remarks at the KC Fed’s annual symposium at Jackson Hole.  Turns out, his speech was a non-event! The Powell Non-Event The media made it their purpose, prior to his speech, to spotlight the fact that the FOMC members, the Fed’s rate setting committee, are very divided on the appropriate policy, given …Read More

The New Mercantilism Rates Race to the Bottom Currencies Depreciate

During the recent period of world growth, where nearly every country’s exports were rising, there was little incentive for governments to manipulate economic policies to foster even more economic growth. Getting back to “normal” seemed to be the universally adopted mantra, and that implied rising rates and tighter monetary policies. However, today, when world trade is contracting (some of which may be due to “trade wars,” but much of which is due …Read More

Where’s The Recession, You Ask? Reprise

The narrative is that the “soft patch”, now so evident in U.S. data, is temporary, related to factors like weather, the government shut-down, and/or trade/tariffs. The Atlanta Fed, where GDP forecasts always seem to come out on the high side, put Q1’s real GDP growth at just +0.3%. And, the N.Y. Fed’s model says +0.9%. In any case, even the most ardent bulls have at least recognized that current data …Read More