28 Apr 2020

Financial Conditions Easing

A few weeks ago, I wrote that even though stock prices were still volatile, the stress in the market was settling down; I called it ‘stabilizing, but turbulent.’ Financial journalists often write about the ‘market plumbing,’ and it occurred to me that plumbing is a good analogy for the difference between stress and turbulence.  Volatility is like being in a nice hot shower and it turns ice cold. Obviously, something’s… Read More

27 Apr 2020

Stocks or Bonds in a Recession?

Even in today’s economic environment, coming up with topics daily can be a challenge.  So, when a reader asks a question, I am more than happy to answer it in this forum. Last week, I received a question in response to my article, ‘Chance of Recession: 100 percent.’  The reader wanted to know what the recession meant for bonds, especially in the coming months when markets will be volatile. That’s… Read More

24 Apr 2020

Chance of Recession: 100 Percent

Last year, the researchers at Bloomberg developed an index that assigned the probability of a recession to the US economy (and others around the world) based on a variety of economic data. I find the index interesting because, unlike a lot of other signals that attempt to do the same thing, this one seems to predict the recession before the recession actually hits. That’s the good news.  The bad news,… Read More

21 Apr 2020

Oil Gets Weird

When US Treasury bills first traded with negative yields in 2008, I took a screen shot, printed it and put it in a folder of interesting stuff that I look back at every few years.  I never dreamed that interest rates would be negative all the way out to 10-years in Europe. Well, it turns out that it’s not just interest rates that can trade completely upside down – yesterday… Read More

20 Apr 2020

Unemployment Today

One of the most jarring aspects of the coronavirus epidemic is the speed and magnitude of job losses.  We now have four weeks’ worth of data, and a shocking 22 million people have filed for unemployment benefits. For reference, the previous record for initial jobless claims over a four- week period was 2,697,00 during the 1982 recession.  During the 2008 financial crisis, the record was 2,637,000, just shy of the… Read More

13 Apr 2020

Coronavirus & Earnings Season

Earnings season kicks off this week, and although we’ve seen a few economic data releases, earnings announcements will offer a lot of information about how the coronavirus is impacting companies. Right now, according to FactSet, earnings are expected to be lower by 10 percent compared to the first quarter last year.  If that’s the case, it will be the largest year-over-year decline since the third quarter of 2009, when the… Read More

6 Apr 2020

Markets Stabilizing, but Still Turbulent

There is no question that we haven’t even started to see the economic impact of the coronavirus, since all of the data that we get is in arrears. For example, last week we got two important pieces of data about unemployment that told different stories.  The good news is that the unemployment rate in march was 4.4 percent, which is an increase from the previous month, but not bad. However,… Read More

30 Mar 2020

A Breath of Fresh Air

Stocks rallied in response to the fiscal and monetary policy response from the government. On the monetary side, the Federal Reserve announced that they would provide ‘unlimited’ quantitative easing (QE), and announced new facilities to support credit markets. The Fed had recently committed to buying $500 billion in Treasury bonds and $200 billion in mortgage-backed securities, and said that it would continue in the amounts needed to support smooth market… Read More

9 Mar 2020

Markets Testing Your Mettle

As I noted here last week, despite the market turmoil, it is important to remember that we planned for this.  We have prolonged periods of market stress built into our financial plans. It’s also moments like this when we can see whether we’ve accurately assessed your risk tolerance.  Every client has an Investment Policy Statement (IPS) that estimates how much an allocation could lose over certain periods. Importantly, we don’t include… Read More

2 Mar 2020

We Planned for This

The selloff was mostly driven by concerns about the spread of the coronavirus outside of China.  Although the World Health Organization (WHO) said that it was not yet a pandemic, it increased its risk assessment from ‘high’ to ‘very high.’ Although the bond market received less media attention, the results were equally dramatic.  For reference, the yield on the 10-year US Treasury on January 31st was 1.51 percent.  On Friday,… Read More