Lately, clients have been asking us one question: how are longer-term bond yields moving higher when the Federal Reserve is cutting interest rates?
New Year, Same Fluctuating Economy
Fiscal Irresponsibility
We frequently receive questions from clients regarding the sustainability of U.S. government debt. According to the U.S. treasury, the American government has run a budget surplus only four times in the last 50 years, with the most recent being in 2001.
Hawks vs. Stocks
It was an action-packed week headlined by Wednesday’s economic “doubleheader.” The Federal Reserve’s June meeting took place the same day as the release of the Consumer Price Index (CPI) inflation report.
Why Does Everything Feel So Expensive?
Last weekend, as my kids played in the park, a fellow dad struck up a conversation. During our talk, he sighed and asked, "Everything feels so expensive these days, doesn't it?" I’ve heard this sentiment frequently, from friends, family and clients who have expressed curiosity about the rising costs of everyday goods and services. While many individuals are feeling the strain on their finances, inflation measures, such as the Consumer Price Index (CPI), appear to be trending downward, showing a rosier economic picture. So why are people feeling the pinch?
Seasons Change But History Remains
As the seasons change and we move into fall, the focus shifts from summer vacation to back to school and football. And just like the calendar, the markets stay true to history. The S&P 500 is down over 3% this month, led by technology stocks which are down 7%. While there is some angst, these declines are normal.
Is China's Economic Dream in Trouble?
Gracing the cover of Time Magazine in 2017, famed political author and Eurasia Group founder, Ian Bremmer claimed “China Won.” This statement was not necessarily controversial, as economists and political pundits all but guaranteed a new age of geopolitical and economic dominance led by the fast-growing nation.
The Pulse on Healthcare Inflation
The economic data released month after month follows a rhythm we have become quite accustomed to, and the Consumer Price Index (CPI) release is an integral part of this familiar cadence. July’s CPI report showed U.S. inflation rose 3.2% in July from a year earlier.
Changing of the Guard
In an otherwise quiet week on Wall Street, the benchmark S&P 500 turned the page on one of its longest-running bear markets. Rebounding by over 20% from its October lows, the blue-chip index has officially surpassed the threshold marking a new bull market. What is notable about the advance from last fall’s lows is how few stocks have participated in the upturn.
Slowing Progress
Inflation has been the most watched economic data point for the past two years. On Wednesday, we received inflation data for the month of April. The headline Consumer Price Index (CPI) increased by 0.4% compared to the prior month and 4.9% compared to the year-ago period. 4.9% compares to economist expectations for an increase of 5.0%, equal to the 5.0% increase seen in March.
Higher for Longer
That a notable Silicon Valley bank failure could overshadow significant developments in the labor market is a testament to how attuned investors remain to the unpredictable consequences of the Fed’s ongoing campaign to raise interest rates.
Opportunity Costs
This week, a slew of economic reports, which included inflation data, employment figures and retail sales reports, continue to indicate that the Fed still has a way to go on its quest to tame inflation.
Higher Rates to the Rescue
With second quarter earnings season complete, a relatively quiet week of company specific news was supplanted by central bank action in the European Union and Canada, with both raising their short-term interest rates by three-quarters of a percentage point. The European Central Bank (ECB) has now lifted rates off the zero bound, to 0.75%, but is behind both the U.S. Federal Reserve and the Bank of Canada in the amount of tightening already implemented.
Inflation Redux
The last time I wrote the blog was April 14 and inflation data was the topic du jour. Serendipitously, the July inflation announcement was the major market event this week. So, to keep me honest, let us revisit some items from the April post.
Rearview Mirror
Years ago, a market technician compared the markets to a car windshield. In this analogy, an investor is in the driver’s seat looking out for future obstacles or opportunities in the “road” ahead, such as discounting future earnings, economic data or signs of a recession. However, as any good driver knows, the rearview mirror is also in view, giving us a glimpse of what recently passed.
Paranoid
This year, investors have wrestled with several paradoxical headlines: rising inflation, a tighter Fed, possible recession, a strong labor market and a healthy consumer. Unfortunately, the paranoia caused by these reports continues as markets wrapped up the first six months of 2022 with the S&P 500 down 20%, resulting in the worst start of the year since 1970.
Under the Hood (of Capital Markets)
Inflation was front and center this week with the release of the December Consumer Price Index (CPI) report. Inflation of 7% Headline and 5.5% Core (ex Food and Energy) were in line with consensus expectations.
Not Your Father's Stagflation
Inflation continues to be in the news and is top of mind for clients. This week, the September Consumer Price Index was reported 5.4% over the previous year, an inflation number well above where it was reported prior to the COVID-19 crisis.
Hot Off The Press
Inflation, fast becoming the most dominant market and economic theme of 2021, has media and market commentators fixated on the topic, this blog included. In fact, this will be our fourth entry covering inflation in the past five weeks. While we apologize for “beating a dead horse,” we would be remiss if we did not provide our readers with further clarification on the subject.
It Finally Happened...
Last year, when our economy began to emerge from the recession and to reopen, so too did concerns of inflation, even though it was below the Federal Reserve’s target interest rate of 2 percent.
