26 Feb 2018

Who is Jay Powell?

On February 5th, Jerome ‘Jay’ Powell was sworn in as the 16th Chairman of the Federal Reserve, following Janet Yellen, who served one term starting in 2014. Powell’s first day on the job was the sharpest day of the recent stock market selloff, when the S&P 500 lost more than four percent. I don’t think that the market fell because of the new Fed Chair, but I have read a… Read More

8 Jan 2018

Recession Risk in 2018 is Greater Than You Think

Last Thursday night, I attended a Financial Planning Association (FPA) meeting here in Chesterfield presented by William Emmons, an economist from the Federal Reserve Bank of St. Louis. His presentation, titled Recession Risk in 2018 is Greater Than You Think, was fascinating.  Despite what people say about government workers and folks from the Federal Reserve, I thought Mr. Emmons was smart, fair and thoughtful – important traits for an economist. Mr. Emmons… Read More

30 Oct 2017

How the Fed Could Change

According to reports Friday, President Trump is expected to announce his choice for Fed Chair sometime next week. Sources in the White House say the list of candidates has been narrowed down to three, current Fed Chair Janet Yellen, Fed Governor Jerome Powell and Stanford University economics professor John Taylor. The “Taylor Rule”, named after the same Taylor who is being considered by President Trump, was first introduced in an… Read More

17 Apr 2017

The Fed’s Next Move

During the 2008 financial crisis, the Federal Reserved used a variety of tactics to stabilize the economy and financial system.  First they cut interest rates, but when they got to zero and couldn’t cut anymore, they started buying bonds in the open market in a process call quantitative easing (QE). The program was controversial because a lot of people thought that it would stoke inflation.  While that didn’t come to… Read More

13 Mar 2017

Meet the Fed’s FOMC

The Federal Reserve will obviously be in focus this week and we talk about the Fed and its members a lot and I suspect that not everyone quite knows how the Fed works.  Today is a quick primer. The Federal Reserve System was created by the Federal Reserve Act in 1913 to serve as a formal lender of last resort to banks during panics and times of a liquidity crisis…. Read More

19 Dec 2016

Bond Market Fascinations: An Interview

Since the election, interest rates have risen across the curve.  The Federal Reserve raised short term interest rates last week for the first time this year, but perhaps more importantly, longer term rates have also risen, which means falling bond prices. Right now, the Barclays Aggregate Bond index is still positive for the year, but the gains are muted, especially compared to the 5.8 percent gain that they enjoyed just… Read More

12 Sep 2016

The End of Summer Break

The end of summer was notably quiet, but summer is over and judging from Friday’s market reaction, it appears that volatility may be back. The chart below shows the expected volatility priced in to options as measured by the Chicago Board of Exchange (CBOE) Volatility Index (VIX). You can see the volatility was high at the start of the year when we suffered a 10 percent correction.  Expected volatility cooled… Read More

6 Sep 2016

Lower For Longer: The View from Tokyo

Several years ago, I was convinced that bond yields were likely to move higher simply because they were at historic lows.  As time went on and bond yields fell to even more historic lows, I changed my tune. People asked me how much lower they could go and while I didn’t really know the answer, I would simply quote the yields in Germany and Japan, which were lower. Then, I… Read More

29 Aug 2016

Yellen Speaks, Market Yawns

Yellen’s long-awaited speech delivered little in the way of surprises, but she did say that ‘the case for an increase in the federal funds rate has strengthened in recent months.’ Still, consistent with previous statements, she reiterated that the outlook remained uncertain and that Federal Reserve policy is not on a preset course. The bulk of her speech outlined the Fed’s current toolkit, which includes rate cuts, asset purchases (quantitative… Read More

22 Aug 2016

Awaiting a Positive Economic Shock

Last week, I attended a ‘first annual’ Wealth and Asset Management research conference held at Washington University’s Olin School of Business. The basic idea behind the event was to connect top tier academics with local practitioners, which seems obvious given Wash U’s stature and the fact that St. Louis has more people working in financial services than any other city outside of the big apple. I was drawn by presentations by… Read More