The quarter ended with gains across the board for the stock market with interest rates continuing the inversion for 1 ½ years. Lo and behold, Jerome Powell the Fed chairman has repeated that rates will go higher during his news conference and minutes from the last Fed meeting confirm this view. Today ADP employment numbers were issued and were much stronger than markets expected. Result was a big decline in the stock market and higher...
Headline in the Wall Street Journal today is “economy shows surprising vigor in the first half” . Layoffs slowed last week, and 1st quarter GDP growth estimates were increased. Even in the face of increasing interest rates. The Fed is indicating that interest rates could increase a couple of more times this year. Consumers continue to spend on durable goods such as cars and on services such as eating out, travel and health care. Economists...
Sometimes it takes a while for information to sink in and filter through asset-to-asset values. Take the housing market. The costs of owning a home have risen significantly because of the increase in interest rates. In previous normal times this would cause a decline in home prices to offset the increased costs of owning. Buying a home would be less expensive because the increase in monthly costs would have to offset the initial cost of...
Fed stays put with the latest meeting but says two more rate hikes coming this year for a total increase this year of ½%. What the Fed says and what the Fed does are different. In fact, research says that people’s perception of inflation and expectations for inflation tend to have a bigger impact on inflation than what the Fed actually does. The threat of more rate increases drives down the expectations of this era...
Recession yes or no, no, or yes? Roll the dice. A recession is when friends, acquaintances, and family lose their jobs. Depression is when you lose your job. The uncertainty of the economy seems like it has gone on forever. Even with two consecutive quarters of negative GDP growth in 2022, the classic definition of a recession, didn’t seem to convince the powers that be that we were in a recession. Turns out it seems...
Anticipation by markets that the bill raising the debt ceiling, having passed the House on a bi-partisan basis, is about to pass the Senate and become law before the US Treasury runs out of the ability to raise funds has boosted the stock market through the top of the range over the past 9 months. Earnings and forward-looking guidance by semiconductor companies is powering the NASDAQ averages. A word of warning: even with the outstanding...
With the debt limit rapidly approaching on June 1st as US Treasury Secretary Janet Yellen has stated repeatedly, it is time for Congress and the White house to get serious. It kind of seems like that is happening but markets were more interested in artificial intelligence and Nvidia’s earning report and future forecasts. At least the S & P 500 and the Nasdaq paid attention to those earnings. The Dow not so much. The Dow...
With spring in the air, bees buzzing, and the sun trying to make its appearance we thought this would be the perfect time to take a look back on what was happening one year ago. Last year's hot topics were full of spry. Here are some highlights from May 2022. “ The Fed announcement came and markets continued lower. ” “I have a rule: the market reaction on the day of a Fed announcement is...
Another Fed rate increase and another bank failure. Just another ho-hum week for markets. They moved the Fed funds rate to 5-5.25% while First Republic Bank was taken over by the FDIC and then purchased by JP Morgan Chase with all deposits secured,1st Republic branches remain open and functioning, borrowers continue to pay loan payments and JP Morgan Chase gets even larger. Other regional bank stock prices continue to suffer while the Fed changes its...
Today 1st quarter GDP was released indicating a slowdown in economic activity. Economic growth slowed to 1.1% in the first quarter from 2.6% in the last quarter of 2022. Higher interest rates are having an impact on growth and bank failures at the end of the first quarter did not help. A full 2nd quarter will give us a better indication of the banking landscape. Consumers continue to power the economy while business spending is...
As the earning season from the first quarter began, some positive bank earnings gave some confidence to the stock market. As the earnings season progresses over the next couple of weeks, we will have a better idea about the economy as well as stock prices that remain overvalued. As I mentioned before, complacency continues with the VIX(volatility index) remaining under 20. We have a Federal Reserve meeting at the beginning of May with markets predicting...
This week's inflation news provides some positives to markets. Interest rates are staying steady at still attractive rates while the SP 500 is maintaining its range between 3900 and 4200. Costs for goods are increasing at a moderate rate but service costs continue to lead inflation. Try finding a hotel room at a reasonable price or go to a restaurant where prices are not inflated. That being said, with markets less worried about inflation and...
