• The Federal Reserve is aggressively raising rates (1.5 – 1.75%), but continues to lag the market with 2-year Treasuries at (2.8% on July 5). • The economy is likely to go into a recession, if not already in one (based on the Atlanta Fed GDPNow forecast). I expect the recession to be shallow. • […] Read the full article…
• In it’s March 15 statement, the Fed said that, ‘in the near term the [Russian] invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity’. The Fed raised rates just .25% • Bonds rates have risen sharply this year and most of the yield curve is […] Read the full article…
We have been hearing about inflation concerns for months. On Wednesday, Federal Reserve Chairman Jerome Powell said temporary inflation could last into next year. Also on Wednesday, the normally very bullish Prof of Finance, Jeremy Siegel from Wharton said a fresh surge of inflation is making him nervous. He went on to say, that inflation […] Read the full article…
In a speech this morning, Jerome Powell, head of the Federal Reserve, said that the economy had met the test for ‘substantial further progress’. He went on to say that the Federal Reserve could begin tapering asset purchases this year, but that the Federal Reserve will be patient when it comes to raising interest rates. […] Read the full article…
Inflation is a highly persistent topic for the media and for some clients as well. Today, let me summarize my outlook and portfolio strategy. • We have short-term inflation; Long-term inflation is the open question • Much of the inflation we do have is due to supply-demand shocks • Consensus opinion of macro economists & […] Read the full article…
Mid- to late March of last year the Covid 19 shutdown of the economy was well underway. The government response was every bit as unprecedented as the shut-down. Today, I’d like to take a big picture view of what happened, where we are and what happens next. Let’s dive in. What happened? Decisions made by […] Read the full article…
Yesterday, President-elect Biden’s “rescue plan” for additional stimulus was released. The plan includes $2,000 in direct payments to individuals, aid for small businesses, $350 Billion in state and local aid and tax breaks and credits for low- and middle- income families. As I review forecasts for future returns, many questions come up about whether stimulus […] Read the full article…
Forming an outlook on the US equity market is challenging because there are so many moving parts. Today I want to take a look at inflation. Inflation matters a great deal. If we exceed 2% inflation, the Fed will surely move aggressively to raise interest rates further. From my research, a deceleration in GDP growth […] Read the full article…
Ten year treasury rates have spiked in recent days and stand at 3.22%. This is the highest level since 2011. Last month the Federal Reserve raised rates for the third time this year. Chairman Powell said in an interview last week with PBS, “Interest rates are still accommodative, but we’re gradually moving to a place […] Read the full article…
In Part 1 I introduced the real earnings yield model (REY) for stocks. The real earnings yield is simply the earnings of the stock(s) divided by the price in real terms (after inflation). As we showed in the last article, 1) the future return for the S&P 500 is significantly related to the current real […] Read the full article…
Today I would like to discuss my favorite ‘simple’ model for determining if the stock market is over- or under- priced, the real earnings yield or REY. If I could only have one piece of information to gauge the market value, this would be it! This model is also favored by a number of well […] Read the full article…