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

28 Jul 2016

Fed Seems Hawkish to Media, Not Markets

As expected, the FOMC left rates steady following its July meeting, noting that the labor market had strengthened since June and that economic activity had been expanding at a moderate rate. Ryan Craft noted that the media is talking as if the Fed was quite hawkish, but the markets didn’t behave that way.  He noted that yields were falling sharply, stocks were largely unchanged after the news and that fed… Read More

6 Jul 2016

Negative Swiss Yields Get Even Crazier

One of the more striking headlines yesterday was that Swiss government bonds now have negative yields out 50 years – that’s right, 50 years! That’s a little hard to fathom, partly because we don’t have bonds that extend that far, but also because 50 years is such a long time.  I mean, if I bought a 50 year bond, I’d be in my 90s before I got my money back. Forget inflation, I’m just talking… Read More

5 Jul 2016

Why Did Stocks and Bonds Gain Last Week?

One of the interesting things about the stock rally last week is that bonds also rallied.  Over longer periods, stocks and bonds are lowly correlated, which means that they are generally independent from each other. Over very short periods, especially when there is a lot of activity, stocks and bonds are usually negatively correlated.  If you had told me that stocks would rebound sharply last week and gain 3.27 percent, which reversed most… Read More

22 Jun 2016

A Cloud on the Horizon

“Businesses are Falling Behind on Their Loans Like it’s 2008.”   This is a headline that popped up on my Bloomberg TOP news screen recently.  Since the financial crisis, every bank I have talked to has been focused on increasing C&I lending.  After being snake bit by real estate, banks have all chased after commercial loans.  That makes a headline like this particularly alarming and a situation worth further investigation. Looking… Read More

22 Jun 2016

Bullard’s Errant Dot Matches Market

In the market summary section above the performance table yesterday, I mentioned that St. Louis Fed President James Bullard had broken ranks with his fellow Fed members and his previous statements and said that he expected rates to stay even lower for longer. I made a quick reference to the famous ‘dot plot’ and said that his dots were pretty far from the consensus.  I thought today I would show the dot… Read More

21 Jun 2016

Bond Market Continues to Surprise

Even though I was on vacation, I couldn’t resist checking market results right before bed (and sometimes during the day).  I was shocked by two benchmark yields: the German 10-year below zero and the US 10-year at 1.57 percent. German 10-year yields have never been negative and the US 10-year has was just 0.18 percent off its all-time low of 1.39 percent, set back in July 2012.  At one point,… Read More

19 May 2016

Yield Curve Swiftly Shifting

When looking at the shape of the yield curve it’s easy to see that a lot has changed. Low yields overall have certainly pinched bond investors and made them look elsewhere for returns, but not all investors are so flexible. For banks who are restricted in terms of the investments that they are allowed to hold, the decision of where in the bond market to invest is an important one… Read More

28 Apr 2016

Fed Stands Pat For Now

As expected, the Federal Reserve left policy unchanged.  For the third straight meeting, they left out any assessment of the balance or risks and said that they ‘continue to monitor inflation indicators and global economic and financial developments. The big concern going into the meeting was that the Fed could describe risk as more closely balanced, potentially providing a strong signal for a June rate hike. The statement no longer… Read More