Year-to-Date economic data is mixed and centered on the health of the economy. 99% of CEOs now expect an economic downturn though half think it will be mild in the US according to Ernst Young ’23 survey. This outlook is shared by most CFOs at public companies as they expect only a mild recession in … Read more
The failures of Silicon Valley, Silvergate, and Signature Banks were due to multiple factors but chief among them was the Fed’s aggressive interest rate hikes. Debt securities lose value when interest rise—if a bank bought a 2.0%, 10-year bond last year but could now get a 4.0% yield if they purchased the same bond, their … Read more
2022 was a correction year in the markets. The cause of the correction was Inflation and the Fed aggressively raising interest rates having thought inflation would pass after supply chain disruptions passed following the Covid-19 pandemic. Looking forward into 2023 the consensus of economists forecast is for a Recession. We have already had 2 back-to-back … Read more
At its July 27th meeting, the Federal Reserve raised interest rates by .75% for the second time saying, “The 2.25%-2.50% range for the federal funds rate is now around the neutral level that is neither supportive nor restrictive on activity.” The FOMC also vowed to continue to fight inflation until it meets their 2% target … Read more
The .75% rate hike by the Federal Reserve and their promise to move “aggressively and expeditiously both to raise interest rates and reduce its balance sheet,” (i.e. reduce purchases of treasuries and mortgage bonds) based upon how the economy and prices react reversed the yield curve ‘contango’ which had made short term rates higher than … Read more
It seems clear now that we are entering an across the board “Bear Market” marked by the Dow Jones and S&P500 indices nearing 20% losses from their highs. The Nasdaq has already fallen 31%. The question is where is the bottom? The fact is no one can say for certain. We can only estimate based … Read more
The risk profile of the market has changed with stock & bond valuations reaching all-time highs, inflation on the rise, and our national debt passing $30 trillion. The Federal Reserve has begun removing stimulus by tapering their treasury and mortgage bond purchases and has signaled they will raise interest rates as soon a March to … Read more
The Bureau of Labor Statistics reported that June’s inflation rate was .9% excluding food and energy. That was an increase of 4.5% over the past 12 months. With food and energy included inflation was up 5.4%; annualized, the inflation rate was 10.8%. Following that announcement Fed Chairman J. Powell reiterated the Fed’s belief that the … Read more
People are concerned about whether to remain invested in stocks & bonds hearing the Federal Reserve is seeing 3.4% inflation now and that they intend to keep interest rates low while continuing market stimulus. Fed Chairman Powell also said should the Fed’s forecast about inflation not be transitory they may have to raise interest rates … Read more
Stocks are a good hedge against inflation because companies can pass along higher raw material, labor and borrowing costs in higher prices and maintain, or even boost, profitability. As inflation rises fixed income security values decline and then interest rates start to rise so fixed income investors can earn a positive, real return (return after … Read more