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The Markets Last week, the United States Federal Reserve (Fed) played “Would You Rather?” Would You Rather? is a board game that presents players with classic dilemmas and asks which options would be more palatable to them. For example, a game card might ask, Would you rather: Be able to run on your hands or write with your feet? Eat chocolate-flavored broccoli or broccoli-flavored chocolate? Have the ability to see 10 minutes into the future or 150 years into the future? Broadly speaking, the Fed has two mandates: 1) support maximum employment, and 2) support stable prices. Last week, [...]

The Markets Investors are taking it all in stride. As Israel and Iran exchanged missile strikes last week, stock markets in the United States remained relatively steady, reported Michael Msika and Phil Serafino of Bloomberg. “On June 13th, as the bombs began to fly, S&P 500 futures fell by 1.6 [percent]. But as the hours passed, the stock market steadily climbed. The index has now recovered to around 6,000, a hair’s breadth from an all-time high…consider the long list of recent events that at first seemed to have epoch-making potential, only to fizzle out,” reported The Economist. This is [...]

The Markets Why did stock markets in the United States finish the week lower? If this were Jeopardy, acceptable answers to that question might include: Rising inflation. Major U.S. stock indices were trending higher until the Consumer Price Index (CPI) Summary showed inflation at a 40-year high. Consumer prices overall were up 0.6 percent in January with seasonal adjustment, and 7.5 percent over the last 12 months without seasonal adjustment, according to the U.S. Bureau of Labor Statistics. U.S. stocks sold off sharply on the news before regaining lost ground. Changing Federal Reserve rate-hike expectations. After the inflation report was [...]

The Markets Here’s a little story about a group called the Fed… In the 1950’s, then Fed Chair William McChesney Martin described the Federal Reserve as “the chaperone who has ordered the punch bowl removed just when the party was really warming up.” In 2020, the opposite was true. The Fed, along with fiscal policymakers, filled the stimulus punch bowl to the brim to keep the country from falling into a recession or depression. In November 2021, Fed Vice Chair Richard Clarida explained: “The COVID-19 pandemic and the mitigation efforts put in place to contain it delivered the most severe [...]

The Markets The term “peak growth” has become almost as popular as the comedy show Ted Lasso. Peak growth is a catchphrase with the potential to mislead. When the term is applied to the U.S. economy, it does not mean the United States economy has reached the pinnacle of growth and it’s all downhill from here. It simply means economic growth is likely to climb at a slower pace than it had previously. Nicholas Jasinski of Barron’s reported the term is, “…a buzzy phrase used nowadays in discussing the rate of change in corporate earnings, U.S. gross domestic product, stock [...]

The MarketsIt’s not a black diamond ski run yet, but the yield curve for U.S. Treasuries is steeper than it has been in a while.A yield curve is the line on a graph showing yields for different maturities of bonds. Yield curves provide insight to bond investors’ perceptions about the economy. There are four basic types of yield curves:Normal: The slope is upward because short-term bond yields are lower than long-term bond yields. A normal curve for U.S. Treasuries has a yield gap of about 2.3 percent between 30-year Treasury bonds and 3-year Treasury bills, according to Fidelity. On Friday, [...]

The Markets Many stock markets around the world moved higher last week. Investors’ optimism in the face of economic headwinds has confounded some in the financial services industry. Laurence Fletcher and Jennifer Ablan of Financial Times cited several money managers who believe investors have become complacent. One theory is investors’ buy-the-dip mentality has become so firmly ingrained that any price drop is seen as a buying opportunity, regardless of share price valuation. Another theory is investors remain confident in the face of declining economic growth expectations because they expect central bankers to save the day: “Key stock markets are [...]