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 […]
Faster Growth Deceleration Prompts Increased Market Turbulence
Market volatility looks to have become the norm of late, with intraday swings of 500 points on the Dow Jones Industrials seemingly commonplace. The days of complacency and ever rising stock prices appear to be firmly in the rear-view mirror, now replaced by daily angst. And, with good reason. Markets have fully recognized that “synchronized” […]
“Normal,” It’s Not What You Think!
Most readers remember the pre-recession days of 4% GDP growth, interest rates at levels where savers had return choices worth pursuing (e.g., the 10 year T-Note at 4%), and workers could count on annual real wage growth. Today, many refer to this as “normal,” and there is a desire, if not a movement, to return […]
Does 2.3 percent economic growth justify Dow 20,000?
A survey of 53 economists by Blue Chip Economic Indicators forecast 2.3 percent economic growth for 2017, up from an estimated 1.6 percent in 2016. While better, 2.3 percent is still low by post-World War II standards. Consensus found that inflation would tick up to 2.4 percent, industrial production would begin to grow again (+1.6 […]
Dealing with the ‘New Normal’
In ’09 and ’10, when Mohammed El-Erian and Bill Gross both worked at PIMCO, they put forth a concept they called “the New Normal.” It postulated that the economy would grow at a much slower rate than it had in the past, and therefore market returns – both equity and fixed income – would be […]
Economic Review – Q1/16
At quarter’s end, the equity market had recovered all that it had lost between 12/31 and 2/11, plus about 1%. Apparently, this was the swiftest recovery in any quarter since 1933. While we were fairly certain that the downdraft was just a much needed correction, like you, we don’t care too much for the uncertainty […]