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
Investors are steadfastly optimistic about economic prospects and continue to buy stocks knowing more stimulus spending is on the way. Analysts’ also see little risk interest rates can rise and the puny returns of Debt securities offer little competition for stocks. Amidst rising stock prices and greater volatility three factors give caution for the excessive … Read more
The Covid-19 virus has required massive central bank policy intervention and raised our national debt to new highs. We also have racial protests, negative real interest rates, and an election with consequences just a few months away. Yet despite the uncertainties, investors have continued to pile into stocks pushing the S&P500 to all time highs. … Read more
The Covid-19 virus has set back the global economy. This has required massive central bank policy intervention and raised national debts to post housing crisis highs. Yet despite the high debt and uncertain world economy, investors have continued to buy and hold stocks. This commentary addresses why this has been true, what we are doing … Read more