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June 2021

The Implications Of Softening Economic Data

After a week of heightened financial market volatility caused by the Fed’s “Dots,” (week ended June 19), the past week was like a walk in the park with much lower market volatility and the equity markets resuming an upward bias. What we have observed, however, is that much of the newly released data, including employment, housing, income, durable goods, and even inflation shows the economy expanding at a much slower speed …Read More

The Fed ‘Dots’ Put Financial Markets In A Tizzy

Financial markets became temporarily unglued with the release of the Fed’s post-meeting statement on June 16 and the publication of its “dot-plot” table. The dot-plot, originated in the Bernanke Fed in 2012, represents the 18 individual policy committee member views as to what the Fed Funds Rate level will be on December 31 of the next three years and then a longer-run view.  Despite Chair Powell’s reiteration at the post-meeting press …Read More

Despite Surging Inflation, Markets Now View It As “Transitory”

On Thursday, June 10, despite a headline CPI of 5.0% Y/Y, the highest reading since August 2008, the “Inflation Narrative” turned on a dime. How else can one explain the rapid 12 basis point (0.12 percentage point) decline in the 10-Year Treasury Note yield, over half of which occurred after the CPI data release? “Inflation Jumps to a 13-Year High” screamed the headline on page A-1 of Friday’s (June 11) Wall …Read More

Apparently Money Really Does Grow On Trees!

Distortions from March’s helicopter money drop continue to cloud the forecast horizon. In nominal terms, income fell -13% M/M in April. This shouldn’t have been a surprise given that the free money raised March’s nominal income by 21%! Another distortion appeared in core PCE (Personal Consumption Expenditure) prices (the price index most watched by the Fed). It rose +0.7% in April, mainly on the back of reopening (rising prices of air fares, hotels, used …Read More