THE FED PIVOT Mark December 13th, 2023, on the calendar. This was the day US Federal Reserve (Fed) Chairman Jerome Powell gave the financial markets an early Christmas present… the long-awaited Fed pivot. The impact of this subtle change in Fed policy was...
Those of us in the financial business spend a lot of our time explaining why things happen. The volatility investors have been experiencing in the last few months and particularly, over the past month, is fodder for explanation bias.
The notion that we no longer must play the “don’t fight the Fed” game will provide some measure of normalcy. Something that has been lacking since central banks began raising interest rates eighteen months ago
Is China on the precipice of an economic collapse? The world’s second biggest economy faces several hurdles, not the least of which is the trickle-down effects from a property sector plagued by excess leverage. This is especially disturbing because real estate influences about 29% of China’s GDP.
Imagine a business cycle where twists and turns rotate through sectors of the economy like a game of musical chairs. Only in this game, one chair is replaced by another, turning the traditional game of musical chairs into a never-ending game where no players are left behind. A never-ending game of musical chairs is the blueprint for a rolling recession.
Rather than trying to dodge the inflation / recession raindrops let’s take a collective deep breath, step away from the forces of supply and demand that throw more curve balls than Sandy Koufax and focus on the output side of the economic equation. Where we can drill down on the tool that measures the collective well-being of a nation; Gross Domestic Production, or its’ acronym: GDP.
INFLATION COOLS BUT LESS THAN EXPECTED The June read in the Consumer Price Index (CPI) supported the position that inflation is receding. US inflation came in lighter than expected rising 0.1% month over month (through May month end) which was in line with...
A SLOW GROWTH ENVIRONMENT If you listen to the analysts, first quarter earnings will be challenged. Consensus estimates have earnings declining by 6% to 7% year over year across the entire S&P 500 spectrum of companies. This is the most severe reset since the...
We all knew that aggressive interest rate hikes would eventually break something. The first shoe dropped on March 10th and March 11th, when the Federal Deposit Insurance Corporation (FDIC) took control of two insolvent commercial banks: Silicon Valley Bank (SVB) and Signature Bank (SBNY) were the second and third largest bank failures since Washington Mutual collapsed in 2008.
The Bank of Canada (BoC) is out front once again. The BoC was the first of the G-7 central banks to deliver outsized rate hikes early in the cycle and is now the first to signal a pause after raising the overnight lending rate by 25 basis points (0.25%) on Wednesday January 25th, 2023. The BoC’s overnight lending rate now stands at 4.5%, a 15-year high.
