Author Archive
October 2018 – Market Commentary
October 2018 In recognition of the strength of the economy Fed Chairman Powell delivered the most hawkish speech of any Central Banker in the last ten years on October 2nd. Speaking before the National Association of Business Economists he described the economy as operating with “limited slack” and that “the Fed would act with authority if inflation expectations shift.” There are many observers who would describe the Fed’s current pace of rate hikes as already acting ...
September 2018 – Monthly Commentary
September 2018 The Federal Reserve releases the value and composition of their Open Market holdings every Wednesday afternoon. These are the securities the Fed bought when, in their judgement, the economy demanded artificially low interest rates. On Wednesday September 5, the value of the Open Market holdings fell below $4 trillion dollars for the first time since peaking at $4.24 Trillion in April 2017. That represents a reduction of approximately 5% and a milestone in monetary ...
August 2018 – Monthly Commentary
August 2018 The U.S. economy continues to chug along with the second quarter growing at a revised 4.2% annualized rate. That strength has carried into the third quarter with the Atlanta Federal Reserve forecasting 4.3% growth for the period. That growth seems to have emboldened equity investors as the S&P 500 posted an all-time high of 2,916.50 on August 29th. The index has since pulled back marginally, but all signs suggest that new records are likely ...
July 2018 – Monthly Commentary
July 2018 The dog days of summer are upon us and the U.S. market has been relatively calm despite the daily barrage of news from around the globe. That’s not to say that global macro events are not on the mind of investors. Quite to the contrary. Donald Trump’s trade war is making the headlines daily, the health of the European banking system continues to be a worry, and the drama of The United Kingdom’s divorce ...
June 2018 – Monthly Commentary
June 2018 In the days and weeks leading up to the recent imposition of tariffs on China, nervous investors sold stocks and pushed bond yields lower. However since the tariffs went into place stock prices have risen, with the S&P 500 just ticks away from its recent high and less than 3% away from an all-time high. Apparently, investors have chosen to look past the immediate trade rhetoric and are focusing on the coming earning season, ...
May 2018 – Monthly Commentary
May 2018 The bastion of calm that swept over capital markets evaporated in May, as a number of emerging market economies and their markets suffered under the strain of bad policy. After years in financial purgatory following their 2001 default, Argentina is again facing financial strain. The serial defaulter returned to the global bond market two years ago with a $16 billion multi-tranche deal that received $70 billion in orders. Investor demand had grown so strong ...
April 2018 – Monthly Commentary
April 2018 Now that we’re well into the new year and the first quarter earnings season is almost fully behind us, it makes sense to pause and try to understand where we are in the economic cycle and what we should expect in the near term future. The most notable recent change is the stock market. Compared to February, volatility has diminished markedly. However, the “buy the dip” mentality that drove stock indices to ever higher levels ...
March 2018 – Monthly Commentary
March 2018 March has followed the pattern of the previous two months, with heightened equity market volatility creating worry for anxious investors. Despite that worry, the bond market has been a bastion of calmness with the 30-year bond trading in a relatively benign range of 3.22% to 3.00%. Given the continued strength of the U.S. economy, we had expected the bond to come under price pressure pushing the yield closer to 3.5%. That ...
February 2018 – Monthly Commentary
February 2018 Six weeks ago, as we closed out January, the S&P 500 Index settled just below its all time high. Financial pundits at the time were saying that a healthy correction would be good for the market. The term healthy correction has always seemed an oxymoron. How can a decrease in the value of one’s investment portfolio be described as healthy? Yet, the term has been in the lexicon of Wall Street for as long as traders have ...
January 2018 – Monthly Commentary
January 2018 The Federal Reserve, in managing the U.S. economy, is tasked with the dual mandate of ensuring full employment and stable inflation. The mandate is somewhat contradictory in that at full employment the tight labor force is likely to force wages higher which, in turn, risks pushing the overall level of inflation higher. That is, of course, if the numbers accurately reflect the actual rate of inflation, which we regularly argue is not ...
