31
Jan
2022
Market Froth Turning Flat
Markets have been testing the Fed ever since Chair Powell indicated that rates are headed higher and their balance sheet will start shrinking. There’s nothing new about this. In the 1980s, then-Fed Chair Alan Greenspan responded to the stock market crash with monetary policy. Ever since then, markets have believed, with increasing strength, that the Fed would bail out the market. In fact, the phenomenon was given a name: the… Read More
24
Jan
2022
Big Bets Prove Costly
The stock market is suffering a setback, mostly due to the change in tone from the Federal Reserve. That isn’t the whole story, in my opinion, however, because I don’t think it fully explains why the worst returns have been in the hottest part of the market, as I outlined last week. Although I don’t have any particular evidence, I think that the selloff is related to deleveraging by hyper-aggressive… Read More
18
Jan
2022
Interest Rates & Tech Stocks
On the last day of last year, the 10-year US Treasury closed with a yield of 1.52 percent. As noted above, it closed last week with a yield of 1.78 percent, an upward change of 0.26 percent, or in percentage terms, 17.1 percent higher. Short-term rates have not changed much so far, but the Federal Reserve has indicated that short-term rates could be at or above one percent by the… Read More
11
Jan
2022
Portfolio Insights
We are pleased to provide a digital copy of Portfolio Insights, our quarterly newsletter. Table of Contents: Stock Market Summary Bond Market Review Visualizing Inflation The Big Picture Click here to read the issue: Q4 2021 Portfolio Insights
10
Jan
2022
The Fed’s Policy Pivot: Higher Rates Ahead
The big story last week was Federal Reserve’s hawkish tone. In fact, though, the Fed’s pivot started a few weeks ago, but last week solidified it through the release of the minutes from their December meeting. There are two key factors that investors are watching: what the Fed plans to do about their bond-buying program known as quantitative easing (QE) and their plans for short-term interest rates. Regarding short-term interest… Read More
3
Jan
2022
The S&P 500 Doubled in Three Years. Now What?
I know I’ve said this before, but I’ll repeat again what Carly Simon sang in her 1971 hit Anticipation: “These are the good old days.” WE now have 96-years of high-quality market data, and a quick look at the numbers showed a few interesting things: The nominal change in the S&P 500 was in the 92nd percentile of all rolling three-year returns. Inflation annualized at 3.6 percent during that time,… Read More
20
Dec
2021
Alternatives are Tough
I wrote a lot about inflation in 2021 for pretty obvious reasons. I also wrote that bonds are difficult investments to own right now because the expected inflation rate over the coming decade is more than the current interest rates. After receiving a lot of inquiries about bond alternatives like REITs, utilities, and the like, I wrote an article shooting down those too. This article is a variant on that… Read More
6
Dec
2021
Illustrating Inflation
For years now, inflation has been an afterthought in the investing conversation because it’s been so dormant. In fact, for a few years, the worry was centered around deflation. And yet, here we are, somewhere in a pandemic (I’d like to think near the end, but omicron is a good reminder that we just don’t know what’s around the corner), and we’re talking about supply-chain bottlenecks and looking at government… Read More
29
Nov
2021
Omicron Variant Strikes Markets
Friday was yet another reminder of how quickly things can change in life and in markets. The Omicron news is concerning, so it’s natural for markets to react sharply as investors take in new information. Stock markets were down sharply on Friday with the Dow down 2.5% and the S&P 500 down 2.3%. The price of a barrel of oil also fell more than 10% on the day. It’s also… Read More
15
Nov
2021
Inflation Runs Hot
This past Wednesday, the Bureau of Labor Statistics released the Consumer Price Index (CPI) data for October, which showed inflation on consumer goods growing at a rate not seen in thirty years. This concerning trend is illustrated in the chart below. The orange line tracks the annual growth rate of the CPI since the 1960’s. This line includes all prices and categories. The white line tracks the same index, but… Read More