At last week’s FOMC meeting, Jerome Powell clearly stated that recent signs of labor market weakness were an important factor in cutting rates. Therefore, assuming inflation continues to decline, the strength or weakness of the labor market will likely determine how much more they cut the Fed Funds rate. The well-followed BLS, ADP, Jobless Claims, […]
“The Fed will spur another round of inflation with rate cuts.” That line and similar sentiments have been plastered all over social media following the Fed’s aggressive 50 bps rate cut. Given the importance of inflation on asset returns, it is worth looking back at the last 40 years and appreciating the relationship between Fed […]
With a staff of over 400 economic Ph.D.s and seasoned leadership, many believe the Fed has a firm grasp on future economic and inflation trends. Accordingly, they must have a good idea of what the future holds for interest rates. Unfortunately, we share a little secret: the Fed’s latest Fed Funds forecast makes little sense. […]
We’ve previously written that electricity demand is projected to outpace capacity over the next decade. The 20-year power purchase agreement signed between Microsoft and Constellation Energy, announced last Friday, highlights the potential for nuclear energy to meet the surging power demands from AI data centers. Constellation Energy will reopen the Three Mile Island reactor shuttered […]
The federal government’s fiscal year ends on September 30, and with it, a budget extension is needed to keep the government running beyond that date. Accordingly, as seems to be the norm, government dysfunction is back on full display. House Speaker Mike Johnson failed to pass a budget extension bill on Wednesday. Moreover, he doesn’t […]
On Wednesday, the Fed embarked on an easing campaign with a somewhat surprising 50 bps cut in the Fed Funds rate. The shift toward an easy money policy follows a 2.5-year tight monetary policy regime. 11 members voted for the rate cut, with one member dissenting. The dissent was the first dissent in almost 20 […]
The VIX Index, often called the “fear gauge,” measures implied market volatility based on S&P 500 put and call options. Most often, the VIX rises when the stock market declines as investors tend to be willing to pay a higher premium for option hedges. Conversely, the VIX falls or hovers at very low levels as […]
As we share below, the market is betting on a 50 bps Fed rate cut at tomorrow’s FOMC meeting. Given tame inflation and labor data, the question is why there is a sudden change in expectations. Might the Fed think the labor market is weakening more substantially than the market? Moreover, deflation could be a […]
Despite improving investor sentiment as the markets approach all-time highs, recent price action in the yen and Fed Funds futures warns that it may be too early to think the recent volatility is over. Let’s start with the yen and what it has done since wreaking havoc on the markets in early August. The graph […]