Published August 30, 2024
Lots of discussion lately about the impact of a change in Federal Reserve policy on stocks. While markets have unquestionably been enthused about the coming cuts in short-term interest rates, that expected action has presumably already been priced into the market. What happens once the cuts begin? Do stock markets “sell the news”?
Published December 30, 2022
Below is a high-level summary of the past year and potential decline levels for the S&P 500 if a recession comes about. Thanks to the folks at Delta for the summary information and to our friend Ravi Palaiyanur for the bottom chart.
“Two of the most robust, leading indicators of recession are the inverted yield curve and a negative six-month moving average of the Leading Economic Index (LEI). The six-month moving average of the LEI turned negative in June and the 2yr/10yr treasury inverted in July. (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…)
Published April 8, 2022
The recent inversion in the yield curve has certainly generated a lot of headlines. The inversion occurs when short-term interest rates become higher than long-term interest rates. The driver of the inversion is usually a Federal Reserve raising rates while investors are skeptical about the long-term economic strength. Thus, the interest rate curve reflects a sort of temporary spike in rates. This inversion often suggests a recession is upcoming as the economic cycle has overheated to the point where the Fed has had to step in to slow it down. (more…)
Published March 4, 2022
Another week, and another twist in our market narrative. Investors are trying to parse so many crosscurrents, we can all be forgiven for not knowing which end is up these days. We are now 100% certain the Fed will raise interest rates at their March meeting. However, that once-possible 0.50% rate hike went out the window when Russian troops marched into Ukraine. (more…)
Published January 12, 2018
With the global economy firing on all cylinders it’s hard to believe investors would find anything to worry about. But they have. For years now investors have wondered when and how the era of near-zero interest rates would end. Are we now on the cusp of seeing how the backside of the Fed’s unprecedented monetary policy easing impacts markets? (more…)