Nothing ever goes in a straight line. For every rally there will inevitably be a retracement, a minor selloff often of no more than profit taking. These are generally pauses where a durable trend either overcomes doubts, or succumbs to them. In the stock market, they call it the wall of worry. In bonds, it’s become a bit more complicated. [...]
Real GDP in the US was revised up to 1.41% quarter-over-quarter (annual rate), still the fourth of the last six to be less than 1.5%. While economists and policymakers have taken to judging the economy by its downside, that is only because the extent of the global problem is revealed by complete absences of an upside. The occasional decent quarter [...]
In light of light inflation measurements, central bankers have no other choice but to step up their rhetoric. Mario Draghi took the mantle earlier this week and has been joined at various points by others. The message they are sending is one that is purposefully muddied. There isn’t left to them any other choice. There are only two pillars holding [...]
I am a long-term optimist by nature. Stop laughing. I am well aware I have attained a reputation as something of a permabear, but that is merely the consequence of the time period in which we inhabit. Read some of the things I wrote in 2009 (and even in early 2010) and you might think them authored by an entirely [...]
Capitalism has always featured feedback mechanisms. They never were perfect, as nothing is going to ever be. Instead, market discipline was always a messy affair as it more often throughout history included periods of undisciplined behavior followed closely by mass exodus, crash, and then depression. Economists after 1929 thought of themselves as a replacement mechanism for self-correction. Regulators had until [...]
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolio this month. The growth and inflation outlook continued to weaken somewhat since last month's update. Certainly nothing very dramatic though, just a general, gentle trend of weaker [...]
(with additional contributions from Margie Fernandez; edited by Joe Calhoun) The Net Worth of Non-financial Corporate Business declined slightly in Q1 2017 according to the Federal Reserve’s Financial Accounts of the United States (Z1). The revised quarterly figures suggest that economic net worth eased to $23.62 trillion after a record high $23.69 trillion in Q4 2016. That likely relates to [...]
The economic reports released since the last of these updates was generally not all that bad but the reports considered more important were disappointing. And it should be noted that economic reports lately have generally been worse than expected which, if you believe the market to be fairly efficient, is what really matters. The disappointing employment report and the generally [...]
Writing earlier this year on the topic of the Fed’s future balance sheet reductions, Ben Bernanke had occasion to recount his experience from 2013. It was a stressful time for the Fed after they panicked into QE3 (and then QE4) and then almost panicked right out of it. The then-Fed Chairman stressed from his experience the importance of communications as [...]
The economic data releases since the last update were generally upbeat but markets are forward looking and the future apparently isn't to their liking. Of course, it is hard to tell sometimes whether bonds, the dollar and stocks are responding to the real economy or the one people hope Donald Trump can deliver when he isn't busy contradicting his communications [...]
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