When (Why) Bad News IS Good News

When (Why) Bad News IS Good News It was another volatile week in the financial markets.  While there were up days, like Friday (May 13), the trend continues to be down.  The table shows the weekly movements in the major indexes and the downdrafts from their nearby peaks.  Note that the Nasdaq and Russell 2000 […]

Today’s Policy Prescriptions May Prolong the Inflation Problem

The Fed (Powell) says the economy is strong and has signaled several rate hikes beginning in March.  The data (and the Fed’s own Beige Book) say otherwise.  But this politicized Fed appears to have no choice as the Administration’s poll ratings are at record lows, much of it due to inflation.  Unfortunately, the tools that […]

As the Fed Confronts the Inflation/Recession Dilemma, Markets Display Signs of Indigestion

Employment numbers for December were much weaker than expected with net new job creation at +199K, significantly below the +422K consensus view.  In addition, the workweek contracted as did factory overtime.  But, markets didn’t react much to this.  Instead, because the Labor Force Participation Rate (LFPR) continued well below its pre-pandemic level and didn’t budge […]

Outlook: 2022 Growth Will Likely Disappoint

After years of trying to move inflation higher (the elusive 2% inflation goal), the Fed’s ultra-easy QE policies along with plenty of help from the fiscal side (“helicopter” money, and outsized fiscal deficits) have more than accomplished the goal.  Overshoot is an understatement!  The financial media tells us every day that inflation is at a […]

Against All Odds – Equities at Nosebleed Valuations in 2022

It appears that the Santa Claus rally did arrive and right on time spurred on by the continued hope that the Democrats could still save Biden’s Build Back Better $2+ trillion spending plan (more government stimulus) and the emerging view that the omicron variant of Covid produces milder symptoms and fewer hospitalizations/deaths than originally feared […]

Fed Policy at a Critical Juncture

Fed Policy at a Critical Juncture A Policy Misstep Likely Spells Trouble Despite the rise in the CPI to a 39 year high, as reported on Friday, the S&P 500 closed at a record high.  At 6.8% Y/Y (+0.8% M/M), annual inflation rose at the fastest pace since 1982.  Core inflation (ex-food and energy) rose […]