The Silicon Valley Bank Insolvency and the Oncoming Recession: Blame the Fed

The big market-moving event of the week was supposed to be the February jobs numbers on Friday (March 10), but there was never a mention of those numbers in the financial media, upstaged by the second largest and completely unexpected bank failure in U.S. history, i.e., Silicon Valley Bank (SVB). The real issue here, which […]

More Rate Hikes + Soft Landing: Incompatible

Having eased financial conditions through much of January and early February, the financial markets now believe that taming inflation might not be the slam dunk that Q3 and Q4 data had suggested. In addition to the over-the-top Seasonally Adjusted Payroll and Retail Sales reports earlier this month, the latest three inflation gauges (Consumer Prices (CPI), […]

The Fed Wins – Rates Higher for Longer

The Implications This week, there were three major data releases – the Consumer Price Index (CPI), Retail Sales, and the Producer Price Index (PPI), all for January.  The CPI met expectations, rising +0.5% for January. The Retail Sales number at +3% beat the consensus estimate of +1.9%, and PPI came in a little hot. Markets […]

Inflation is on the Wane

Why the Fed is Still So Hawkish The evidence on inflation is quite clear; it peaked in June and is now on the wane. The latest data came from the Producer Price Index (PPI) which rose only 0.2% in October (consensus was +0.4%). This is a monthly level the Fed could live with (2.4% annual […]

Employment Report – Not What Meets the Eye

Fed Near End of Rate Hikes The big news today was that payrolls increased by +261K. This caused markets to rally (shoot first, ask questions later). Interest rates moved up because the headline +261K may cause the Fed to be even more hawkish. Nevertheless, beneath the veneer, this was a very weak employment report. There […]

Tamer Inflation

But Trouble Lies Ahead as Fed Has Overtightened As we go to press, the Fed has called an Emergency Meeting for Monday, October 3. The official reason is a “Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.” Our view is that […]