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 […]
Increasing Market Volatility
Why It’s The Fed’s Fault Equity markets ended Q1/22 (Thursday, March 31) with the first quarterly loss in two years (since Q1/2020, i.e., when the pandemic began). Of interest was the rush to sell in the last hour of trading, as if mutual funds and equity ETFs did not want to show too many equity […]
The Pandemic Caused Significant Economic Impacts; Not All Inflation Is Related
Over the last several blogs, we have opined that the pandemic hasn’t changed the economy’s potential growth path. The chart shows GDP growth rates beginning in the mid-1990s (with the Atlanta Fed’s +1.3% Q3/2021 forecast). The horizontal line shows a 2% growth level. Note that the left-hand side of the chart shows much higher growth than the right-hand […]
The Economy Has ‘Recovered’ – Anemic Growth To Follow
The September jobs report was filled with cross-currents, some showing possible economic weakness, some showing strength. This makes the Fed’s job exceedingly difficult. Is the economy strengthening or weakening? What’s the correct monetary policy prescription? “Taper” asset purchases? Raise interest rates? Since September payrolls were so ambiguous, perhaps October’s (which will be available to the Fed prior to its November meeting) […]