This week, the Federal Reserve updated their economic projections. They are now forecasting 1-2 rate cuts this year, and by the end of 2025, they predict rates will be 1% lower. The labor market remains strong with low unemployment, and the inflation rate has decreased but is still over the 2% target. Depending on the […] Read the full article…
• Ten Year Treasuries touched 5% on October 19th, up 1.43% since Jan 1. • Two-year rates exceed ten-year rates in July of 2022 (yield curve inversion). • In the past, yield curve inversion has always signaled recessions. • The recessions typically have occurred 18-24 months after inversion. Over the course of the past months, […] Read the full article…
• 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…
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…
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…
This time of year, we put heavy focus on developing assumptions for future market returns and adjusting our model portfolios. The process is complex, but boiling it down we build a composite view based on a wide range of expert opinions on the economy and markets from experts such as JP Morgan, Fidelity, Vanguard and […] Read the full article…
• The Fed cut rates for the third time since July on Wednesday • The target lending rate is now 1.5% – 1.75% • In the last four times the Fed cut rates, when they stopped at three cuts the economy avoided recession As expected by the market, the Fed cut rates again today. Jerome […] Read the full article…
• The Federal Reserve is expected to cut rates .25% on Wednesday • The US economy showed better than expected growth in Q2 at 2.1% • Still, the Federal Reserve is concerned about slow global growth and trade tensions and will likely make a preemptive cut to keep the economy on track. The Federal Reserve […] 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…
Dan Ivascyn is the Chief Investment Officer and co-manages the Pimco Income Fund with Alfred Murata. Mr. Ivascyn, along with Mr. Murata, was named fund manager of the year by Morningstar in 2013. On Tuesday, Bloomberg reported that it is time to ‘take a more cautious and defensive strategy’ with the $113B Pimco Income Fund. […] 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…
Jeremy Siegel, Wharton finance professor, likes to use the analogy of a ‘tug of war’ when it comes to the impact earnings and interest rates have on stock prices. He tells his students that the numerator (earnings) and the denominator (interest rates) are in a ‘tug of war’. The analogy is playing out in a […] Read the full article…
Jeff Gundlach, CEO of DoubleLine Capital, covered his outlook for the markets in his annual webcast on Tuesday. The webcast covers a wide range of topics including the economy, inflation, interest rates and fixed income and equity market outlooks. He presents dozens of slides to illustrate and back his convictions. I’ll highlight his key forecasts […] Read the full article…
The interest rate yield curve continues to flatten. US stock prices continue to melt up. PE ratios have stretched into mildly overvalued territory. We remain neutral weighted on the US stock market and may adjust tactical allocations down if the PE ratio stretches much further. Interest Rates The Federal Reserve, as expected, hiked the Fed […] Read the full article…
Yesterday the Federal Reserve hiked the federal funds rate .25% (25 basis points) to .75%-1.0%. The hike was in line with market expectations. The market reaction was a rally to 2385 by the close (March 15). Meanwhile the dollar fell. US stocks are up roughly 6.4% since the beginning of 2017 and over 11% since […] Read the full article…
Jeff Gundlach, CEO of DoubleLine Capital, spoke about his views on the US economy and global markets in his Tuesday webcast “Just Markets”. I’ll highlight some of his key points. Interestingly, Gundlach was one of a very few investment professionals who predicted a Trump win. He has a pretty strong track record on his market […] Read the full article…
Did the Fed Depress the US Economic Recovery? In a recent blog post Dr. Ed Yardeni, a noted economist, opined that the Federal Reserve contributed to depressed economic recovery in the US. He cited three very interesting arguments and I thought it may be of interest to summarize his thoughts here. (source: www.blog.yardeni.com May 26, […] Read the full article…
The Federal Reserve has been signaling that it expects to raise interest rates based on improvements in the economy. The exact timing isn’t clear and the Fed has indicated that they will be data driven. Should you be concerned about how any rate increase will affect your portfolio? In this article, I will examine the historical impacts on the US market based on the first rate hike from the period from 1982 to present. […] Read the full article…
There is a good deal of talk about when and how aggressively the Fed will raise interest rates. This has caused many including, Eric Rosengren, President of the Boston regional branch of the US Central Bank, to go on record as saying of the current 2.15% 10 year rate as, “not a rate that is going to be sustainable in a completely normalized economy, which does imply the 10-year rate at some point in the normalization process will not be as low as it currently is.” (source: MarketWatch). Let’s unpack the issue here in a bit more detail. […] Read the full article…