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 Delta variant could take a toll on economic growth. There was some good news last week. The 7-day moving average of COVID-19 cases in the United States declined. The bad news was that the rate of infection remained about 99 percent higher than it was one year ago. As Delta variant infections surged across the United States, expectations for economic growth dropped more sharply than anticipated. Lisa Beilfuss of Barron’s reported on changes to third-quarter forecasts for U.S. gross domestic product (GDP) growth. “Goldman Sachs cut its forecast to 3.5% from 5.25%, Oxford Economics revised its [...]
Weekly Market Commentary – The term “peak growth” has become almost as popular as the comedy show Ted Lasso.
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 [...]
Weekly Market Commentary – It’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.
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 [...]