15 Oct 2018

Interest Rates and Equities: A Selloff Explained

Somewhat like Hurricane Michael, the stock market selloff last week seemed to come out of nowhere quickly, and it hit hard. The question on everyone’s mind is what caused the sharp move?  In truth, nobody really knows the answer, but that also means that my guess can’t be wrong. There are several broad themes that could explain the selloff, including further weakening of US relations with China expressed in the… Read More

30 Jul 2018

Trade Wars and Interest Rates

Every day brings another headline (or Presidential tweet) about escalating trade tensions between the US and the rest of the world. What impact could these tariffs have on the bond market? The most popular narrative is that prices may increase due to tariffs being passed through to US consumers. Higher inflation should lead to higher long-term rates and the potential of a more hawkish Fed. This “cost-push” view of inflation… Read More

9 Jul 2018

Bond Yields: Still Crazy After All These Years

To my surprise, it’s been more than three years since I wrote about negative yields on bonds throughout the world.  In my article, which can be found here, I wrote that bond yields could go a lot lower than I ever thought since I thought that they were ‘zero-bound.’ A year later, I returned to the topic when the yield on 50-year Swiss bonds had a negative yield.  The article… Read More

18 Jun 2018

What Happened to International Stocks?

As we approach the halfway point of 2018, some things are looking very different from last year. Although it has been a bumpier ride compared to last year, US stocks are on track to have another good year as the S&P 500 is up more than 4.5 percent and the Russell 2000 Index is up more than 10 percent. But unlike last year, international stocks have effectively been flat, flipping… Read More

30 Apr 2018

Cheap Rates

It finally happened. For the first time since 2014, the yield on the 10yr Treasury just traded over 3.0%. For months, many have proclaimed that 3.0% is the Maginot Line that, if crossed, spells impending doom for the markets. While it is easy to get excited about round numbers, the reality is that the economic impact of 3.0% is no different than 2.99%. The Treasury rate that I really find… Read More

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

13 Feb 2018

Stock Market Correction: The Early Autopsy

While I think it’s far too early to say that the correction is over, the sharp rallies over the past two days are welcome signals that suggest the forced selling that characterized last week’s sharp daily losses may be over. My view of the recent market selloff has two components.  First, as I outlined on last Monday, February 5th (click here for the article), I believe that the initial cause… Read More

5 Feb 2018

What the Heck Just Happened?

What the heck happened?  Stocks were rolling along, picking up steam even, when all of a sudden, out of the blue, ‘POW!’, the index hit a wall. In reality though, while the move lower was a surprise, it wasn’t really all that surprising.  It’s true that I couldn’t have told you the week before that stocks would have fallen sharply last week, but a move like this really isn’t out… Read More

22 Nov 2017

The Curve is Falling… The Curve is Falling!

The yield curve has been a very hot topic lately in the financial news media.  Multiple times a day, there are commentators pointing to the yield curve as a sign that markets are on the verge of imploding.  Is it time to panic? The Federal Reserve has continued to push short term rates higher throughout 2017.  Long term rates have responded by falling 10 bps.  This has led to a… 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