JP Morgan and Wells Fargo led off earnings season on Friday. Despite the woes hitting smaller banks, the big banks are in a highly profitable environment. The question facing big bank shareholders is how long such an environment lasts. Specifically, will the economy enter a recession, and what might that mean for credit losses and […]
The FOMC minutes show Fed members collectively downgraded their economic forecast for 2023. Instead of the “soft landing” we have been warned about for the last year, the Fed is downgrading its outlook to a “mild recession” in the second half of the year. Per the FOMC minutes: “For some time, the forecast for the […]
Volatility in the equity markets has fallen significantly over the last few weeks. The graph below compares two popular measures of equity volatility. Realized volatility is the annualized volatility based on recent actual changes in the S&P 500. Implied volatility, using options pricing, gauges expectations for expected equity volatility. Realized and implied annualized volatility are […]
At the bottom of this Commentary, we share a popular Tweet warning that Hedge Funds collectively have their largest net short position in S&P 500 mini futures contracts in over ten years. The broad takeaway from most analysts is bullish. They presume hedge funds and CTAs (non-commercial traders) will cover their positions resulting in a […]
CPI, Retail Sales, and Employment are often the three most important economic data releases in a typical month. It turns out that last Friday’s employment report was not even the most important report on that day. On Friday, the Federal Reserve reported that U.S. Commercial Bank Loans fell by $104.7 billion in the last two […]
We added to our 30 year UST bond exposure on Wednesday via the ETF TLT. The recent rally in bond prices and the corresponding decline in 30 year yields shows promise it will continue. The graph below charts the steep increase in 30 year yields since late 2021. Throughout 2022, 30 year bond yields were […]
As we gear up for Friday’s employment report, we wonder if we are in the dying days where the BLS labor report only measures human employees. Might a BLS report in 2030 break down the unemployment rate between laid-off humans and broken-down robots? That may sound crazy, but there has been a big uptick in […]
Our most recent newsletter (Analysts Warn of Recession. Analysts Disagree) discusses confusing signals emanating from the stock and bond markets. To wit: “Currently, 100% of the 10-yield spreads we track are inverted. Historically, a recession follows whenever more than 50% of those spreads are inverted. Every. Single. Time.“ Yet despite a 100% reliable recession warning- […]
In a surprise announcement Sunday morning, OPEC cut oil production by 1.15 million barrels per day (bpd). Per OPEC, the cuts aim to support stability in the oil market. Since December, crude oil prices have oscillated between $70 and $82 a barrel. In mid-March, it broke the range falling to $64 a barrel. A break […]