When the Stimulus Tailwinds Fade
Prologue Big numbers are showing up in U.S. economic data, partly due to the low levels of economic activity a year ago, partly caused by the reopening, and partly caused by the generosity of Uncle Sam. We’ve had three helicopter money drops, two of them in 2021. The economy is rapidly reopening as seen from […]
Careful Mr. Powell; Higher Rates Will Kill the Recovery
Treasury yields rose again this week; blame this one on Fed Chairman Powell. In an interview at the Wall Street Journal’s Job Summit, he said that the Fed isn’t ready to stop the run-up in yields “until financial conditions tighten.” In so saying, he paved the way for those financial conditions to tighten as markets […]
The Economy: Damaged Labor Markets; An Inflation Head Fake
On Friday, February 5, markets were set to rise no matter what the employment data showed. If they beat to the upside, that would validate the reflation/pent-up demand narrative. If they disappointed, well, that would simply mean more fiscal and monetary largesse (which financial markets love). Either way, heads markets rise; tails, ditto. Labor Market […]
“V” vs. “u” and the Flawed Inflation Narrative
The equity markets finally took a breather last week (ended January 15th), with the S&P 500 falling a mere 1.5%; that’s down from its record high a week earlier. Perhaps the really poor economic data played a role, but then again, equity markets like such poor data because it means more stimulus (Biden’s $1.9 trillion […]
Mr. Market Won’t Let the Grinch-Like Economy Steal This Christmas!
The employment data for November were downbeat, and those surveys were taken prior to many newly imposed restrictions including stay-at-home orders. Other economic data, including Black Friday-Cyber Monday spending, and manufacturing and service indexes also disappointed. Pessimism also showed up in the Fed’s recent Beige Book, its survey of business sentiment. Yet, despite all the […]
The Real Recession Is Just Starting
At month’s end, we are going to see the BLS announce a 30%+ bounce in real GDP (the Atlanta Fed’s forecast is now above 35%). Much of this is already priced into the equity market, so a positive or negative reaction will only occur if the reported number is significantly above or below the consensus view. In […]