The Post-COVID Volatility When one thinks back on all that has happened since 2020, it is, I think, amazing how little the US economy has changed over that time. Obviously, the economy was volatile during the shutdown of the economy during COVID and during the period when the economy was re-opening. Real GDP fell over 7% in the second quarter [...]
There's a lot going on right now and I've got way more questions than answers. Here's a few that seem important: Is this stock market correction the beginning of a bear market? Obviously, no one knows but Friday's close did mark a milestone. The S&P 500 and NASDAQ Composite both closed below their respective 200-day moving averages. The 200-day MA [...]
Predicting the future course of the markets - interest rates, stock prices, commodity prices - is impossible. That is true even in times when the future seems set, when it seems predictable, when there is consensus about the impact of all the factors that affect markets and ultimately economies. It is even more true during times of great uncertainty, times [...]
Over the last two years, the evolution of the US economy has been driven by a return to “normal”. The distortions of the response to COVID had a profound impact on the economy that I believe will persist for many years. The change in cash levels at the household level were large and have proved more persistent than most expected. [...]
Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't [...]
Trust the Fed. Ha! It’s one thing for money dealers to look upon Jay Powell’s stash of bank reserves with remarkable disdain, more immediately damning when effects of the same liquidity premiums in the real economy create serious frictions leaving the entire world exposed to the consequences. When all is said and done, the Federal Reserve has created its own [...]
Was this taking it a little too far, a little too obvious? Central bankers, since they aren’t real central bankers, their entire job is to project confidence. We get that. No matter what happens along the way, you can be sure policymakers aren’t going to ever let on in public they’re concerned. Think the famous scene in the Naked Gun [...]
When even Bloomberg can’t help but notice, not just notice but then write about it, that’s significant. Normally a staunch water carrier for the official Federal Reserve position, these curves getting bent so far out of what would be better shapes aren’t so easy to just dismiss and ignore any longer. Jay Powell says household and business finances are holding [...]
What do American consumers know that Jay Powell and the FOMC apparently don’t? Certainly, those voting policymakers at the Federal Reserve are going to start raising their policy rates for political reasons under pressure from politicians facing deeper and deeper economic scrutiny for every dollar higher in crude oil. The Fed, however, can’t extract any additional supplies of black gold [...]
This is a truly weird shape for the US Treasury curve to find for itself. Really steep up front, seriously upward sloping consistent with the Fed’s stated rate hike intentions (which influence short-term rates most directly up to around the 2-year note). From there on down, though, it’s flat. As in pancake, almost. I can’t recall a time when the [...]
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