Writing earlier this year on the topic of the Fed’s future balance sheet reductions, Ben Bernanke had occasion to recount his experience from 2013. It was a stressful time for the Fed after they panicked into QE3 (and then QE4) and then almost panicked right out of it. The then-Fed Chairman stressed from his experience the importance of communications as [...]
For once, it does seem like the FOMC was asking of its members the right question. They spent years incredulous over the lack of effect due to whatever of the multiple QE’s without changing expectations. No matter how little evidence for their initial let alone ongoing success, they would always, always keep up the “recovery is coming” narrative. In many [...]
The economic data releases since the last update were generally upbeat but markets are forward looking and the future apparently isn't to their liking. Of course, it is hard to tell sometimes whether bonds, the dollar and stocks are responding to the real economy or the one people hope Donald Trump can deliver when he isn't busy contradicting his communications [...]
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are, however, changes within the asset classes. We are reducing the equity allocation and raising the allocation to REITs. Based on the bond markets there has been little change in the growth and [...]
The textbook says that whenever the central bank raises its policy rate that means tightening. Actual experience over more than just this last lost decade demonstrates that at the very least it is much more complicated than that. There is far more evidence of monetary policy being nothing more than a response, as that reverse condition can absolutely be established [...]
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. The performance of markets in the first quarter of the year was a bit schizophrenic. Stocks performed well which one might interpret as a reflection of improving economic growth prospects. Certainly President Trump and [...]
The Fed did, as expected, hike rates at their last meeting. And interestingly, interest rates have done nothing but fall since that day. As I predicted in the last BWER, Greenspan's conundrum is making a comeback. The Fed can do whatever it wants with Fed funds - heck, barely anyone is using it anyway - but they can't control what [...]
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. The Fed spent the last month forward guiding the market to the rate hike they implemented today. Interest rates, real and nominal, moved up in anticipation of a more aggressive Fed rate hiking cycle. [...]
Economic Reports Scorecard The economic data released since my last update has been fairly positive but future growth and inflation expectations, as measured by our market indicators, have waned considerably. There is now a distinct divergence between the current data, stocks and bonds. Bond yields, both real and nominal, have fallen recently even as stocks continue their relentless march higher. The [...]
There hasn't been a lot of change in our indicators since the last update and therefore, despite my discomfort with the altitude of this stock market, there are no changes to the Global Asset Allocation this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. Bond markets moved around some during the [...]
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