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Consumer Borrowing Facing Headwinds
The recent New York Fed Credit Access Survey report shows consumer borrowing is becoming more difficult. As we have been discussing for a few months, the fallout of the March regional banking crisis and the inverted yield curve is causing banks to tighten lending standards. The Fed report is based on a survey taken every […]
Jul 24, 2023
Albert Edwards Asks What on Earth is Going On?
Albert Edwards of Societe Generale wrote a thought-provoking piece based on the graph below. He asks, “What on earth is going on?” In other words, why are corporate interest expenses as a percent of profits falling as interest rates soar? Albert surmises that many companies borrowed heavily in 2020-2021 at very low-interest rates, and the […]
Jul 21, 2023
Will the Nasdaq Rebalance be a Nothing Burger?
On July 24th, the Nasdaq 100 will reduce the weightings of its top seven holdings to try to better balance the top-heavy market cap-weighted index. At the same time, the rebalance will increase the weighting of many other smaller Nasdaq 100 stocks. We suspect that the large index funds will adjust their holdings appropriately in […]
Jul 20, 2023
Are The Treasury and Fed Managing Market Liquidity?
The federal debt cap was lifted on June 3, 2023. The Treasury immediately flooded the markets with large debt issuance to meet its massive borrowing needs. Most investors presumed market liquidity would decline as net positive Treasury issuance pulls money from other investments. As shown below, the Treasury has since added about $450 billion to […]
Jul 19, 2023
Europe Is Facing Economic Stagnation
Yesterday’s Wall Street Journal led with a troubling article on Europe’s economy. Their article, Europeans are Becoming Poorer, leads off as follows: “The French are eating less foie gras and drinking less red wine. Spaniards are stinting on olive oil. Finns are being urged to use saunas on windy days when energy is less expensive. […]
Jul 18, 2023
Mixed Bank Earnings Kick Off Q2 Results
Earnings season began with mixed results from three of the largest US banks on Friday. JPMorgan and Wells Fargo beat expectations on the back of higher net interest income, while Citigroup missed the mark on earnings. JPMorgan took the spotlight as it reported record quarterly profits of $14.5B (+67% YoY), partly due to a $2.7B […]
Jul 17, 2023
Are Small Cap Stocks Next Up For a Rally?
The Magnificent Seven (Apple, Amazon, Google, NVIDIA, Meta, Tesla, and Microsoft) have been on a tear this year. At the same time, market breadth was horrendous as most other stocks were not following their lead. For example, the market-weighted S&P 500 is up more than 10% versus the equal-weighed S&P 500. Recently, the market’s breadth […]
Jul 14, 2023
The CPI Dilemma, Decoding Monthly vs Annual Inflation Rates
The BofA graph below (right) is making the rounds on Twitter and causing investors quite a dilemma on how to think about CPI. Barring zero monthly rates of CPI for the rest of the year, CPI, computed on a year-over-year basis, will increase. Investors’ dilemma is decoding the stark differences between changes and absolute levels […]
Jul 13, 2023
As Goes Bank Credit Goes GDP
The US and much of the global economy are driven by bank credit. Since debt has grown consistently faster than GDP for over 40 years, bank credit is critical in steering economic activity. Given the strong dependence on debt for growth, a pick-up in bank credit levels typically results in stronger GDP growth and vice […]
Jul 12, 2023
The Coming NASDAQ 100 Rebalancing
NASDAQ announced it will rebalance the NASDAQ 100 Index to “address overconcentration in the index by redistributing the weights.” They do not expect to add or remove stocks from the index. They will announce the changes to the NASDAQ 100 this Friday, but they will not take effect until July 24th. Click HERE for the […]
Jul 11, 2023
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