Fed Transparency = Market Volatility

Markets have tanked since the worse-than-expected CPI reading, and the latest Fed hawkishness means no Powell “pivot,” no Fed “Put,” and no soft-landing. The table shows the market peak for the four major indexes, the level and percentage changes at the market’s trough at June’s end, the levels and percentage changes from the top of […]

As the Once Hot Economy Smolders, a Hawkish Fed Gets New Ammo

The biggest surprise this past week was the unexpectedly large rise in the Payroll Employment Report, at +528K, more than double what appeared to be an optimistic consensus estimate of +250K. Most of the major equity indexes eked out a slightly positive week (see table), but neither the equity nor the fixed income markets liked […]

Reprise: Why the Upcoming Rise in Interest Rates will be the Fed’s Last Hurrah

Reprise: Why the Upcoming Rise in Interest Rates will be The Fed’s Last Hurrah

The equity market rally this week (ended July 22) looks to us to be a “Bear Market” rally supported by short-covering and the mistaken belief that a soft landing is possible and a recession avoidable. The DJIA closed up +2.0%, the S&P 500 +2.6%, the Nasdaq +3.3%, and the Russell 2000 +3.6%. Still, these indexes […]

As the Fed Fiddles, the Economy Burns

A Powell Failure The Fed tightened its administered Federal Funds Rate (the rate banks pay to borrow reserves) by 75 basis points (bps) (0.75 pct. points) to 1.50%-1.75%, a rate hike not seen since 1994.  The issue here is that, for the first time in its 109 year history, the Fed is tightening into the […]

Blame It on the Fed – Part I: The Brewing Recession

For the past month, everybody has hated bonds; now they hate stocks too!  The table shows the percentage fall in equity prices for the week ended April 22, and from their nearby highs.  Note that the Russell 2000 has now entered “Bear Market” territory (down more than 20%), and Nasdaq is precipitously close.   Week […]

Yields Spike as Fed Reveals its Balance Sheet Intentions.

The Economy Weakens as Consumer Frugality Begins Equity markets fell last week (April 8), but the biggest change was in fixed-income as the Fed’s minutes and continued hawkishness from Fed governors continued to put upward pressure on the yield curve.  At the week’s start, interest rates had inverted (short-term rates higher than long-term rates).  As […]