Published August 8, 2025
Our friends at Delta Research posted an amazing chart this week showing that huge AI spending by companies has contributed more to economic growth this quarter than falling consumer spending. We wouldn’t expect that to be sustainable. The question is whether consumer spending rebounds or not. (more…)
Published September 13, 2024
After waiting all year for the Federal Reserve to begin lowering interest rates, the day has finally come when they will do so. Below is Schwab’s take on the Fed’s rationale behind changing their rate policy and how that path might affect the bond market. (more…)
Published August 9, 2024
It’s been quite a week for markets. Addressing various topics around the market stress, we offer thoughts from Blake Millard. Here’s Blake commenting on Monday’s market selloff where futures were down as much as -5% before cutting that loss by day’s end. (more…)
Published September 29, 2023
The stock market has been experiencing a pullback as investors adjust to a “higher for longer” interest rate outlook. That change in outlook came from the Federal Reserve’s recent meeting as shown below in the “dot plot” projection by the Fed members. The dots represent each Fed member’s outlook for interest rates over the coming year. Investors look at the median of those projections for an indication of what the Fed members see on the horizon. The stronger-than-expected economy has driven a push upward in those projections from the Fed’s June meeting. And it was a significant push upward – a full +0.5% from 4.6% to 5.1%. Stocks have reacted poorly to the change in projections, dropping -5%.
Published July 7, 2023
There are a wide range of inputs portraying a change in investor attitudes over the past few weeks. Our friends at Delta Research offer one possibility of the change in how interest rates are viewed. We hope you find it interesting.
“The Federal Reserve raised the Fed Funds rate from 0%-0.25% to 5.00-5.25% since March of last year. The pace and amount of rate increases came as a surprise to most market strategists. The reason for the surprise is market strategists believed the economy would slow rapidly as a result of much higher interest rates. Coming into 2023, the market expectation was for one more rate hike, a pause and then rate cuts in the second half of the year. The Fed raised rates in March and May of this year and now is expected to raise again in July and then once again later in the year. (more…)
Published January 13, 2023
Stocks have been moving higher. What began in Europe, spread to China, and is now beginning to show up elsewhere. Here are some charts displaying the shift in market tone in these areas. First up, a clear uptrend has formed over the past 3+ months in Europe. Fears of a natural gas shortage during the winter simply did not materialize. (more…)
Published December 2, 2022
Investors increasingly believe the Federal Reserve has seen peak inflation and, recession or no, will very soon pause their interest rate hikes. Stock markets are responding as if the market has bottomed; with the question now how slow 2023 global economies will be. While employment layoffs are regularly in the news, labor markets remain strong with metrics of consumer activity holding at high levels. At worst, the economic data has become mixed, compelling investors to shift away from the hand-wringing that characterized the late Summer/early Fall. China appears to have pulled back on the most restrictive Covid measures. Supply chain issues have all but disappeared. The FTX crypto implosion looks to be limited to the landscape of crypto companies and investors, not spreading outward to threaten any systemic trouble. Investors now seem to look forward to a 2023 without the storm clouds they once feared. (more…)
Published November 25, 2022
The stock market began its decline one year ago. We posted the first chart below around that time to point out the danger ahead from the failed break higher in smallcap stocks.
Since that failed breakout, we have seen an absolute assault on markets by the Federal Reserve with interest rates being raised at an almost unprecedented pace. The short-term 2-year interest rate has jumped from near zero to 4.50% in twelve months (second chart). (more…)
Published August 19, 2022
It has been quite a long time since we have seen such disparity in the narratives flowing down Wall Street. How long and hard the Fed will tighten rates is one source of contention. But it’s not the biggest. That would belong to where corporate earnings are headed, which is sort of a Street barometer for whether or not the economy falls into a recession (how deep that recession is a third dimension discussion floating around also). (more…)
Published August 12, 2022
The article below from Zacks provides a good overview of the key economic indicators to look for as we move into the second half of the year.
“The Federal Reserve is actively trying to curb demand in the economy by raising rates, and all the talk is about whether they can usher a ‘soft-landing’ without triggering a deep recession. So, the Fed will be a key factor to watch in the second half of the year. But I also have three other economic fundamentals investors should put on their watchlists, as they could be key in determining the path of the economy and markets over the next year. (more…)