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Newsletter
There was a lot of chatter this past week about the most recent oil price inflation and interest rates. This week, we will dig into higher oil prices, inflation, and the link between interest rates and the economy. However, before we delve into that topic, it was a sloppy first week of trading to start September.
Newsletter
While financial conditions remain tight, economic data supports the bullish narrative of "hope." That narrative is "hope" the Fed will cease hiking rates. "Hope" that the economy will avoid a recession, and "hope" that earnings growth will accelerate into 2024.
Newsletter
An economic downturn remains one of the most significant risks to the stock market, along with interest rates. However, on Friday, Jerome Powell spoke from the Jackson Hole Summit. He delivered, as expected, a "down the middle" speech suggesting the Fed will remain focused on incoming data for any upcoming policy changes. Over the last several years, market reactions to Jackson Hole Summit speeches have been relatively normal, with the exceptions of 2019 and 2022.
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This week we will discuss why I doubled my bond position in my personal account. That may seem odd, given that rates have continued to tick up this past week. Much of the recent increase was related to a knee-jerk reaction to the July FOMC minutes, which failed to show signs of an aggressive timeline to cut rates. Notably, the rate uptick only improved the fundamental backdrop of bonds versus stocks.
Newsletter
The market took a breather this past week as earnings season begins to wind down. Such was expected, as discussed in last week's commentary.
The VIX volatility index calculates how much the options markets imply the S&P 500 will move over the coming month. Recently, it has been at historically low levels. Such low levels of implied volatility are a sign of complacency because it signifies that few investors are buying options to protect against adverse movements. Volatility is […]
It’s no secret that mortgage rates have risen sharply. They now stand above those seen on the eve of the financial crisis. However, less appreciated, the difference between mortgage rates and U.S. Treasury yields is almost .75% more than in 2007. The predominant reason for the wider-than-normal gap is the status of the banks. Banks […]
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This week's debt downgrade by Fitch sent the media into a tizzy. However, it was just the catalyst needed to start the correction we have discussed over the last few weeks. As noted two weeks ago:
Newsletter
Patience has been hard to come by as stock prices continue trading higher. As shown below, the S&P 500 is set to close out its fifth straight month of gains. In addition to being up six out of the seven months this year, returns are unusually high, with the S&P advancing 18% year-to-date.