Powell delivered remarks to Congress yesterday on the outlook for the economy and banking system. His prepared remarks were strikingly similar to those made at last week’s FOMC press conference. This is no surprise as Powell is making an effort to avoid speculation that the Fed is near the end of its tightening cycle. In […]
Private Equity (PE) firms are known for their use of leveraged buyouts in acquiring targets. In a leveraged buyout, the acquiring firm issues a large amount of debt to acquire the publicly traded equity of the target. The acquiring firm then places that debt on the target’s books. These transactions boomed during the cheap-money era […]
In mid-March, Silicon Valley Bank failed, and it appeared many smaller regional banks were facing the same bankruptcy-inducing problems. Large and smaller regional banks were losing deposits to higher-yielding money market funds. As a result, the regional banks had to recognize losses on loans and securities. The losses were predominately a function of higher interest […]
Since 1955 every recession was met with weak labor markets. On average, over the 75 years, unemployment rose by 2.7%. The lowest instance was 1.5%, and the highest, excluding 2020, was 4.8%. Periods of weak labor markets in non-recessionary periods have not occurred over this time. As such, it’s a safe assumption that the odds […]
With the Fed pausing rate hikes yesterday, as was widely expected, the focus is now on what comes next. Will the Fed hike one or two more times as is implied in the Fed Futures contracts, or will they pause and let the monetary policy lags catch up to the economy? No one, including Fed […]
Yesterday’s CPI data and today’s FOMC meeting will guide monetary policy expectations for the summer months. As the FOMC debates whether to raise rates or pause, they will likely spend a reasonable amount of time reviewing the CPI report. The headline CPI number was good, with May prices only rising 0.1%. The year-over-year CPI fell […]
Implied volatility in the stock (VIX) and bond markets (MOVE) tell an unusual tale of investor sentiment. Implied volatility uses options contracts to measure the expected price movement of a security or index. The ratio of the VIX to the MOVE index is at its lowest level in 27 years. Such tells us that bond […]
The price of cattle futures has been bullish since troughing during the early days of the pandemic. As we share below, Live Cattle futures are up 10% this year and about 125% since early 2020. The price of live cattle just briefly eclipsed the late 2014 peak. One of the reasons for the bullish trading […]
The Eurozone just entered a recession as the region posted two consecutive quarters of negative economic growth. The manner in which it entered a recession is a bit quirky. GDP shrank by 0.1% in the first quarter of 2023. But, it was a revision from positive to negative growth in the fourth quarter of 2022, […]