Powell’s remarks in Jackson Hole were more dovish than I anticipated. Powell did not hedge; the clear direction of policy was lowering rates. The focus of the Federal Reserve’s (Fed's) narrative was shifting away from inflation risk to employment.
Since the release of ChatGPT, mega-cap technology companies poised to profit from AI-enhanced software tools or cloud AI-model training capabilities have seen a surge in their stock prices. Yet, many have yet to realize significant AI-driven revenue growth, let alone a substantial impact on their bottom lines.
I have received a lot of blowback from my recommendation that the Federal Reserve (Fed) drop the Fed Runds Rate by 150 basis points (bps) over the next several weeks. Certainly, the data has come in stronger than I (and many others) have anticipated. Particularly surprising was the drop in jobless claims, now nearer to the midpoint of my 200k to 240k range after breaching the upper limit.
The recent U.S. Treasury yield rally is compared to a similar rally in Q4 2023, driven by expectations of a shift in Federal Reserve policy.
The financial markets appear to be rather confident the Fed will finally begin its rate cutting process at the September Federal Open Market Committee meeting, at a minimum. The debate has now shifted as to what this easing cycle will ultimately look like.
Last Monday morning, I tried to shake up the conversation about how far behind the curve the Federal Reserve (Fed) is currently by suggesting an inter-meeting 75 basis points (bps) cut and another 75 bps cut in September.
Never before in my history studying the Federal Reserve (Fed) has the Fed’s policy come into question immediately following the Fed decision.
Once again, the Fed kept rates unchanged at the July FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced exactly a year ago and still resides at a more than 20-year high watermark.
Coming into this earnings season, one of the most intriguing questions was how well the consumer-facing companies would be able to maintain their pricing power. The new algorithm for success is a bit more complicated than “raise prices by x.”
The economic data is coming in very good for markets. Starting with GDP, we observed a modest growth rate of around 2% in the first half of the year. While not spectacular, it’s far from recessionary conditions. This level of growth, with slight inventory accumulation, suggests a stable economic backdrop.
The second quarter began with inflation concerns causing a negative return in April, but improved inflation led to a more hopeful market in May and June, with AI and semiconductor stocks leading.
The big story making the rounds this summer is the spike in the small-cap Russell 2000 since the release of the latest Consumer Price Index (CPI) report, which shocked the market by printing 0.0% month-over-month in June.
The bitcoin halving event in April 2024 reduced the block reward for miners, which is expected to increase bitcoin’s price.
This week's commentary reflects a mixture of political, economic, and technical challenges facing investors. Let’s begin with the political landscape which continues to heavily influence sentiment.
Welcome to the second installment of our new blog series, “Navigating Earnings Season,” where I examine the world of earnings reports from major companies — giants like JP Morgan and Pepsi, as well as niche players in various sectors.
The assassination attempt against former President Trump gave a bump to his odds of becoming president, as they rose from 60% to 67% on Monday morning on Predictit.org.
Heading into the second half of 2024, it appears the markets are no longer focusing on the odds for a recession.
Welcome to our new weekly blog series, “Navigating the Earnings Season.” In this series, I dive into the world of earnings reports from major companies, spanning giants like JP Morgan and Pepsi, as well as niche players in various sectors.
The UST yield curve has been inverted, but there is speculation about when it will “un-invert" and move out of negative territory.
The outlook for the Federal Reserve (Fed) through the first six months of 2024 has been a bit of a roller-coaster ride to say the least. While one could argue the overarching premise has been for rate cuts, it has certainly not been a smooth ride.
The employment report from last Friday, in my view, was weak. Although the headline number came in slightly above expectations, the composition was troublesome, with more than 110k jobs subtracted from the last two months and private sector jobs lagging.
The presidential debate was the big story of the week and revealed a mild market preference for former President Trump. Notably, during the 90 minutes of the debate when there was no other market news, S&P 500 Futures rose 10 points, due to Trump’s business-friendly policies despite his higher-policy unpredictability.
Remember when an inverted yield curve used to predict recessions? Here we are about two years removed from the Treasury yield curve moving into negative territory, and the U.S. economy has yet to move into recession territory. The economy’s resilience has certainly been a surprisingly welcome development and has left many a market participant wondering what happened.
Recent economic data slightly underperformed expectations, though nothing dramatically concerning. Jobless claims dipped just below the 240K level, which is something to watch closely. Claims above this threshold have historically been indicative of labor market weakness, which could influence Federal Reserve (Fed) policies.
Is the labor market okay? Depends on who you ask. The answer to that question should be a strong guidepost for whether you like Consumer Staples relative to the broad market.
Last week’s inflation data was very encouraging, with key indices like the Consumer Price Index and the Producer Price Index coming in below expectations. Stay up to date with the latest commentary from Professor Siegel.
The shift in consumer behavior toward buying more discretionary items is attributed to the deceleration of inflation, according to Costco management.
Inflation is not fun. And—for the past 30 years—it has largely been a non-issue for consumers. That dynamic has changed. The relevant question is whether this is something persistent and meaningful or simply a fleeting feeling.
Once again, the Fed kept rates unchanged at the June FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced in July last year, and still resides at a more than 20-year high-water mark.
India’s equity markets have experienced strong growth and momentum, with rising incomes and political stability contributing to the country’s potential for accelerated growth.
In today’s complex global economy, currency fluctuations play a crucial role in shaping investment outcomes. While we’ve previously emphasized the importance of currency hedging in a U.S. investor’s international portfolio, there’s a subtle aspect that often goes unnoticed: the positive impact of weak currencies for Japanese and European companies and U.S. tolerance of it as a check on Chinese exports.
There was a significant reaction in the bond market to the latest job growth figures, which exceeded expectations. The positive surprise led to a sharp 10 basis point rise in long bond yields. Interestingly, equity markets remained resilient in the face of this increase, suggesting a collective market relief that we are not heading toward a slowdown or recession.
The most important precondition for the U.S. dollar to lose its dominance would be the existence of a viable alternative currency, which currently does not exist.
Here we are through the first five months of 2024, and you could say the more things change, the more they stay the same. What exactly do we mean, you might ask?
The story that captured all media attention last week was Donald Trump’s guilty verdict. But the Trump conviction had no effect on the markets or predicted probabilities in betting markets for him becoming president.
While the money and bond markets continue their Fed-watch saga, there is one constant that we have been emphasizing for the fixed income landscape: a new rate regime.
The Federal Open Market Committee is always data-dependent. But the dependency is not always the same. There are times when inflation matters more than the labor market, and times when the situation is reversed. Every regime is unique. There is never a perfect corollary to a previous experience. This time is not different.
Economic reports from the past week provided reassurance following the previous week's disappointments. Stay up to date on the current conditions with the latest commentary from Professor Siegel.
There is no question that Fed policy remains the primary force driving the money and bond markets for the third year in a row.
The consensus has egg on its face with respect to Chinese stocks. It wasn’t supposed to be this way. Entering this year, one of the big concerns—and the primary reason for China’s ugly multi-year bear market—was the country’s destiny with a “4-handle” on gross domestic product (GDP) growth.
Despite the overall positive response from the markets last week, the data presented its share of ups and downs. Stay up to date on the varied indicators with the latest commentary from Professor Siegel.
Last week was quiet on the economic and data front. The one high frequency data indicator we did receive was jobless claims, which ticked up after a dull stretch of near constancy. The jobless claims figure came in at 231,000, which is at the higher end of my preferred range of 200-240k.
It seems that every few years, the term “stagflation” gets floated around to describe the current and/or prospective U.S. macro landscape.
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The markets rightly experienced a significant relief last week. Stay up to date on last week’s Fed meeting with the latest commentary from Professor Siegel.
Once again, the Fed kept rates unchanged at the May FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25% to 5.50% band introduced in July 2023 and still resides at a more than 20-year high-water mark.
Attention-grabbing performances from the likes of Microsoft, Google, and Tesla swayed market sentiments back to growth.
I have never come anywhere close to running a marathon of any sort. I am told the last mile could be the most difficult part of the endeavor.
The economy, inflation, interest rates and market valuations drive the key questions facing advisors. Does the tech stock landscape mirror the boom of 1996 or the bust of 2000? What will be the impact of Meta's inaugural dividend payment? Is now the time to increase allocations to international Markets? What are the challenges faced by retail banks by not providing competitive rates and the resulting opportunity cost of holding cash? Finally, we will address the complexities advisors face in investment management, client growth, and retention.
As 2023 draws to a close, what will 2024 have in store for investors? It appears this Fed rate hike cycle is over and now we pivot to potential rate cuts. But not until inflation has sufficiently cooled. As we've seen before, a lot can happen in the meantime.
Our 2024 Economic & Market Outlook covers:
