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monetary policy

The New (Scary) Fed Steps Into New Territory

The pandemic’s second wave has appeared in Europe and now in the U.S. The Fed is more concerned about the economy and has taken the unprecedented step of telling Congress it will monetize whatever spending Congress desires. (Not your Father’s Fed!) The latest weekly unemployment data confirm the Fed’s worst fears: The Recovery has stalled! Overview No matter who wins the election, the following issues must be faced: Deflationary forces are at …Read More

The Recovery Stalls; Fed Pledges “Lower for Longer;” Equity Markets Pause

With the Fed pledging to keep rates low even when (or if) inflation rises above its 2% target, it is hard to see why long-term Treasury yields (and those of other quality issuers) won’t move toward yields of similar debt in the world’s other industrial economies (i.e., Europe and Japan). The economic lull is now showing up in both the labor market (Initial Claims) and in retail sales, likely because …Read More

Caution: Markets Are Forward Looking

This is the time of year to take stock of where the economy and markets stand and try to figure out what lies ahead. Markets are telling us something, and so is the underlying data. In what follows I will try to parse the signals the markets are sending, look at the data and the trends, and give you my view of what 2019 holds for investors. What the Markets …Read More

The Economy from 50,000 Feet

A few friends have expressed the belief that interest rates have nowhere to go but up. This, of course, has been the mantra of the market for the past several years, and, perhaps, my friends have been listening too long to the talking heads on bubblevision. Here’s why it won’t happen: Today’s U.S. economy has many similarities to that of 1990s Japan. These include asset bubbles (equities), high debt burdens …Read More

On a Recession Watch

For the first time since the industrial revolution, the U.S. faces two significant growth issues: 1) a declining labor force; and 2) a job skills mismatch.  The declining labor force is demographic in nature and is occurring in every industrial economy; likely a function of the long-term success of capitalism.   The skills mismatch is a function of technological change that is so rapid that the skills of the existing labor …Read More

Market Melt-Up: Caution – Sentiment in Nosebleed Territory

Since my last column, the Dow Jones Industrial Average (DJIA) did indeed hit 20,000 and has since gone well beyond.  Most of the post-election run-up initially appeared to have occurred in the November 8th to December 20th period when the index went from 18,333 to 19,975, a rise of 1,642 points (7.9%).  Over the next 44 days, until February 2, the DJIA was flat, actually losing 116 points.  But since …Read More