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The Recovery Will Be Weaker And It Will Take Longer

While markets were slightly higher on the week (see table), there was a clear rotation back toward technology after several weeks of a lull for that sector.  This is clearly shown by the week’s Nasdaq outperformance.   January 22 January 15 % Change DJIA 30,997 30,814 +0.6% Nasdaq 13,543 12,999 +4.2% S&P 500 3,841 3,768 +1.5% Markets continue to ignore economic reality and continue to be focused on a rosy …Read More

Using 2020 Hindsight: The Emerging “New Normal” Picture

Using 2020 Hindsight: The Emerging “New Normal” Picture The year finally ended, and, as has been typical, the latest data continued to be downbeat. Despite the weak economic data, the equity market ended the year at all-time highs.  The S&P 500, at 3,576 was up 10.5% for the year after falling 34% in the February/March period, quite the reversal. The current market mantra is that, with the vaccines now in …Read More

Mr. Market Won’t Let the Grinch-Like Economy Steal This Christmas!

The employment data for November were downbeat, and those surveys were taken prior to many newly imposed restrictions including stay-at-home orders. Other economic data, including Black Friday-Cyber Monday spending, and manufacturing and service indexes also disappointed.  Pessimism also showed up in the Fed’s recent Beige Book, its survey of business sentiment. Yet, despite all the downbeat economic news and forecasts, equity markets set new all-time highs the week ended December …Read More

Vaccine: That Pinhead of Light at Tunnel’s End

Pfizer’s vaccine announcement gave the equity market the vision and hope that some semblance of “normal” was closer than previously assumed; perhaps a light at the end of the tunnel. Reality is that, due both to the complex logistics of handling the Pfizer vaccine, the two shot inoculation process, and the voluntary system in America, that light at tunnel’s end is just a pinhead, with a long and treacherous journey …Read More

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

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