For the stock market, the first quarter of 2019 turned out to be the mirror image of the last quarter of 2018. Since hitting a low on Christmas Eve, there has been no looking back for the S&P 500 as it rebounded over 13% thus far in 2019, nearly erasing the bear market losses from the end of 2018. Clearly, this renewed optimism in the markets is a result of booming economic… Read More
Investors have been hyper-focused on every word that comes out of every Federal Reserve official since October, but when the European Central Bank (ECB) made a major policy reversal last week, the markets yawned. Ten years ago, Warren Buffett described the 2008 financial crisis as akin to a heart attack. The Fed, acting as a physician, prescribed zero interest rates and when that wasn’t enough, they tried an experimental strategy known as quantitative… Read More
The market rebounded firmly from yesterday’s slide, with several macro developments in focus. The market was positive on comments from Fed Chair Powell that the Fed will be ‘patient’ as the economy evolves, and that it is listening to the market’s concerns (Powell put anyone?). Participating in a joint interview with former Fed chairs Yellen and Bernanke at the American Economic Association conference in New York, Fed Chair Powell said… Read More
Last week, the phrase ‘inverted yield curve’ exploded from the confines of a trading room to the everyday world. It hit me when I went to a holiday cocktail party after work one night and someone said, ‘oh, I heard that the stock market is down because something else is upside down. I guess the whole world is upside down!’ Before we get into what happened last week, let’s take… Read More
Last week, I said that the stock market had three big questions for the Federal Reserve and its chair Jay Powell. You can read the full article here, but the questions were as follows: What is the course of interest rates? What will happen with the Fed’s balance sheet? Will the Fed support the stock market, as it has in the recent past? This past week saw a major market… Read More
Stocks have been rocky since the start of the fourth quarter, and while investors are worried about a few things from tech stocks to crude oil to junk bonds, but I think the primary concerns are interest rates and the Federal Reserve. There are three huge questions on the table. First, how high will the Fed raise short term interest rates? Second, what is the Fed going to do with… Read More
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
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
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
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
