Inevitable adjective incapable of being avoided or evaded I heard that word a lot last week. There is now a fully formed consensus that the US, and indeed the world, now faces an inevitable recession. It can't be avoided. Central banks will have to keep hiking rates because that's the only way to kill inflation. Yes, the inflation is due [...]
Stagflation. It's a word that strikes fear in the hearts of investors, one that evokes memories - for some of us - of bell bottoms, disco, and Jimmy Carter's American malaise. The combination of weak growth and high inflation is the worst of all worlds, one that required a transformational leader and a cigar-chomping central banker to defeat the last [...]
Well, that didn't last long. I wrote last week about the inversion of the 10-year/2-year term spread as the yield of the 2-year Treasury note rose above the yield of the 10-year Treasury note. Using end-of-day data, the curve inverted on Friday, April 1st, and stayed that way until....Monday, April 4th. The spread closed last Friday, April 8th at 19 [...]
Why did stocks sell off in recent months? Was it the emergence of the Omicron variant? That was a popular narrative right after Thanksgiving but that lasted less than a month before stocks decided to look past COVID make a new high right after the new year. Was the correction due to fears of the Fed raising interest rates and [...]
Crude oil prices rose over 25% last week and as I sit down to write this evening, the overnight futures are up another 8% to around $125. Almost every other commodity on the planet rose in prices last week too, as did the dollar. Those two factors - rising dollar and rising commodity prices - mean the likelihood of recession [...]
Last week when I wrote this weekly piece, the S&P 500 futures were down 80 points as Russia appeared poised to attack Ukraine, which they ultimately did last week. Today I sit here to write again and the futures are once again down, this time around 100 points. What's interesting is that the level this evening is well above last [...]
What is the consensus about the economy today? Will 2022 growth be better or worse than 2021? Actually, that probably isn't the right question because the economy slowed significantly in the second half of 2021. The real question is whether growth will improve from that reduced pace. The Atlanta Fed GDPNow tracker now has Q4 growth all the way down [...]
In individuals, insanity is rare; but in groups, parties, nations, and epochs, it is the rule. Friedrich Nietzsche The new year got off to quite a bang last week. It was almost as if someone flipped a switch and investors/traders suddenly decided that all that stuff they believed last year was just so passe. Growth stocks? Nah, who wants [...]
The headlines last Friday were ominous: Inflation Hits Highest Level in Nearly 40 Years Inflation is Painfully High... Groceries and Christmas Presents Are Going To Cost More Inflation is Soaring.. America's Inflation Burst This morning on Face The Nation, Mohamed El-Erian, former Harvard endowment manager, former bond king apprentice, economist, and the man who seems to have a permanent presence [...]
Almost all the economic data released last week was better than expected. ISM manufacturing PMI, Redbook retail sales, ISM non-manufacturing PMI (an all-time high), factory orders (headline and ex-transportation), ADP employment, jobless claims (new post-COVID low), non-farm payrolls, the unemployment rate, manufacturing employment, all better than expected. There were some disappointing reports: construction spending was down 0.5%, the trade deficit [...]
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