Is a recession coming? That is the billion-dollar question investors now face. One gauge to help us answer the question is corporate bond yield spreads. When the yield differential between corporate bond yields and risk-free Treasury bonds widens significantly, it signals that bond investors are taking a risk-averse stance. Simply, they are pricing higher odds […]
While stagflation fears grip the market and make headlines, the bond market appears more concerned about ‘stag than ‘flation. Stagflation describes sluggish economic activity or a recession coupled with higher prices and rising unemployment. The ‘stag’ refers to a stagnant economy, while the ‘flation’ is inflation. Please read our article, Stagflation Panic: A Misdiagnosed Media Spin, […]
Heading into April 2nd, investors were under the impression that Trump’s goal was to set tariff rates that allow for fair trade with other nations. Trade impediments like tariffs, taxes, VATs, currency manipulation, and other methods that don’t allow for fair trade would be offset with tariffs. More simply, Trump would level the playing field. […]
Over the past few weeks, we have discussed the sharp jump in the trade deficit due to a surge of imports trying to front-run potential tariffs. Thus far, the impact of front-running tariffs on economic data has only been significant in consumer and corporate surveys and the aforementioned trade deficit. That was until Tuesday. The […]
Yesterday’s Commentary discussed the vast divergence in the economic sentiment of Democrats versus Republicans. In the piece, we wrote: “Democrats think today’s economic outlook is worse than during the peak of Covid and the financial crisis of 2008. Sentiment is tricky to convert into an economic forecast. Sometimes, sentiment is bad, but consumers continue to […]
Stocks are hitting the skids as April 2nd, or Liberation Day, quickly approaches. Investors are rightfully scared that tariffs announced on Liberation Day will be crippling to the economy and harm corporate earnings. Based on recent comments from Donald Trump, that is a logical concern. However, what if Trump is playing with emotions to make […]
It wasn’t that long ago that used car prices were soaring as the production of new cars was crimped due to Covid-related supply line shortages. Since then, used car prices have stabilized as the supply lines have healed. However, like many goods, prices haven’t retreated to pre-pandemic levels. As we wrote in yesterday’s Commentary, the […]
Despite what some may think, the impact of the new 25% auto tariffs will not necessarily benefit all US auto companies to the detriment of their foreign counterparts. For example, as we share below courtesy of Bank of America, Ford produces about 80% of their US-sold cars in the US. However, GM and Stellantis, the […]
Ben Bernanke popularized the wealth effect theory during the financial crisis in 2008. In his words, “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.” Moreover, he argued this would create a “virtuous circle” of increased spending, higher incomes, and further economic growth. Since then, the Fed has […]