short-term interest rates

Weekly Update

Change in Market Tone

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Published August 2, 2024

 

The market tone has shifted notably this week as soft economic data pushed forward two competing narratives: 1) the Fed will almost certainly begin reducing short-term interest rates at their September meeting, 2) the economy may be softer than expected. The long-expected reduction in interest rates has been a recent boon for interest rate-sensitive stock sectors like financials, real estate, and small company stocks. But the softening economic data was read as surprising. It was the soft economic data that sent yields crashing this week and pulling stocks down with them. Furthering the slide, expensive Mag 7 stocks have largely failed to deliver earnings that would keep investors on board. (more…)

Weekly Update

Interest Rates and Economic Uncertainty Keep a Lid on the Market

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Published September 16, 2022

 

Investors have their hands full these days trying to parse the conflicting economic reports. The labor market tells us that unemployment is at record low levels. Wages are rising for the first time in a very long time. Yet, fear is growing that the economy may be softening, while inflation remains higher than investors would like (fueled by those same rising wages). This week was a microcosm of the pitched battle between bulls and bears.

We will look at the market’s largest and perhaps most influential stock, Apple. (more…)

Weekly Update

Bulls and Bears in a Massive Tussle

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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…)

Weekly Update

Market Offering Almost Nowhere to Hide

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Published May 6, 2022

 

This week the Fed made the first of their larger interest rate hikes with a 0.5% move (50 bps in bond market parlance). Here’s the path of Fed interest rates that the market foresees – straight up from now through March 2023. (more…)

Weekly Update

Yield Curve Inverts but Recession Still a Ways Off

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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…)