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The Fed raised rates by 25 basis points to 5.00-5.25%, hinting at a pause in future hikes. Weaker than expected Q1 GDP (+1.1%) and signs the labor market is finally cooling off argue the Fed may be done. However, higher inflation remains sticky, and the most recent ISM manufacturing survey shows the price paid component […]
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The recent failures of Silicon Valley Bank, Signature Bank, and First Republic and the poor performance of other regional banks serve as a reminder of the underappreciated risks of investing in bank stocks. It’s not just the inherent banking risks that should make investors selective in buying bank stocks. The historical relative performance of bank […]
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Taking risks is no longer necessary to make a return on your savings. Not long ago, “cash is trash” was a common theme as savings accounts yielded zero. Of course, such was the intent of the Federal Reserve following the “financial crisis” in the hope that inflating asset prices would trickle down into economic growth. […]
The equity markets surged last Thursday and continued upward on Friday on poor economic news and bad breadth. GDP was 1.1%, well below the 2% expectation. The miss was due to higher-than-expected inflation and a drop in personal consumption. Consequently, Fed Funds imply investors are confident of a rate hike this week and a good […]
When most economic prognosticators forecast inflation, they often base it on money supply changes. At first blush, such makes a lot of sense. The more money that exists, the less its worth, ergo the more inflation. However, such logic fails to consider how often money circulates. Monetary velocity quantifies the rate at which money is […]
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An old adage says investors should “Sell May And Go Away.” The historical analysis suggests summer months of the market tend to be the weakest of the year. The mathematical statistics prove this as $10,000 invested in the market from November to April vastly outperformed that amount invested from May through October. Interestingly, the max […]
In late 2020 and throughout 2021, earnings didn’t matter. That statement is a little tongue in cheek, but there were many instances where investors looked beyond bad sales and earnings, or even poor forward guidance, and focused solely on stock buyback plans. It didn’t matter that earnings growth stalled or the CEO expected weaker sales. […]
Throughout 2022, higher bond yields scared off equity investors. Such a relationship is not surprising given how much yields rose last year and the fact that higher yields do not bode well for profit margins or valuations. The graph below highlights the strong correlation between TLT and SPY. Our circular highlights show the local peaks […]
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The vast “cash hoard of 2023” has the bullish media salivating about what it means for the future of equities. That cash hoard in money market funds now exceeds $5.2 trillion. Such has brought forth the age-old narrative that the “money on the sidelines” is set to come into the markets. However, they don’t tell […]