Even though we are bombarded every single day with non-stop news about inflation, crumbling affordability, and historic lows in consumer sentiment, the stock market's core narrative remains completely unchanged. Equities are continuing to march toward records because of exceptionally strong corporate earnings, particularly from the market’s largest titans, fueled by immense investments in Artificial Intelligence infrastructure. Combined with massive corporate stock buybacks that systematically shrink the available pool of public shares, and an unwavering wave...
Inflation accelerated significantly in May, driven by lingering energy price spikes, the compounding ripple effects of the Middle East conflict, and aggressive trade tariffs. This combination triggered a sharp rise in long-term interest rates, causing a notable steepening of the yield curve. If this sounds like technical jargon, remember the narrative from 2022 through 2025. Back then, the financial media was obsessed with the inverted yield curve, constantly sounding the alarm that an imminent recession...
So much uncertainty surrounds the next 6 months to a year, let alone a year or more from now, that all possibilities remain open. Positive, negative, and everything in between. The question is not just whether AI changes the economy. It already is. The better question is whether the constant controversy, focus, and discussion around AI is causing us to forget everything else happening at the same time: inflation, affordability, the war with Iran, and...
Does the current economy feel like a contradiction? You are not alone. I have recently subscribed to the Financial Times, a fantastic publication—you likely recognize it as the “pink paper” found in international airports—which provides a vital global perspective on business and politics. One of my favorite journalists at the FT, Gillian Tett, recently highlighted three acronyms that help make sense of the erratic behavior we see in the markets today. To understand why the...
Staggering Sums: Record Highs and the Rule of Unintended Consequences All news seems to be good news as we finish April: Index Price April 1 Price April 30 April Performance Nasdaq 100 24,019.99 27,452.12 +14.29% S&P 500 6,575.32 7,209.01 +9.64% Dow Jones DJIA 46,565.74 49,652.14 +6.63% MSCI World Index 4,176.79* 4,625.50** ~+10.74% GDP growth for the first quarter was released at 2%, a little below expectations of 2.2%, but close enough. The economy is still...
Main Street is cratering. Wall Street is celebrating. Go figure. We are sitting in the middle of a global stalemate, gas prices are exploding, and the average American feels like they are underwater. According to the latest data, consumer sentiment did not just drop, it fell off a cliff. We are at a historic low of 47.6. That is lower than the Great Recession. Lower than the 2022 inflation peak. But look at the tickers...
The Familiar Echo of 2022–2024 Does this sound familiar? The stock market is carving out new highs, economic data looks “okay” on paper, and employment numbers remain steady. Yet there’s a massive disconnect. Those in charge of the economy are sounding optimistic, claiming everything is good, a sentiment we heard repeatedly between 2022 and 2024. Even though the top-line economy looks stable, many Americans are simply not feeling it. During the Biden years, the term...
Animal spirits can be scary and can work for both declines and advances in a very volatile environment. It is pretty easy to see the risks to the current economy, including inflation, global conflict, chaotic leadership, and questions about economic growth. As we have discussed before in Market volatility is head spinning, markets do not need much to become unsettled when uncertainty is already elevated. David and Goliath Is Not Dead You do not need...
The war continues and markets, although volatile on a daily basis, have reacted as if the war could end any day. And in fact, it could end any day. Problem is a unilateral declaration by the US is only part of the equation with Israel and Iran having a significant say. The Energy & Derivative Squeeze In the meantime, oil/gas prices continue to increase, and increases are happening in the many derivative products relation to...
As outlined in the newsletter a couple of weeks ago, we reviewed market movements during war and then 1 year later, demonstrating that investing based on wars is not an effective strategy. Given those results, we are only 3 weeks into the war with Iran, so we do not have the wisdom of 1 year later. Today the Nasdaq entered correction territory, meaning a 10% decline from the recent high. Index 2026 All-Time High Current...
Funny thing about wars. It can be expected for markets to decline. And sure enough, market averages are declining. Here are some stats from Google AI chatbot Gemini: Average One-Day Drop: Roughly -1.0% Average Peak-to-Trough Decline: Roughly -5% to -6% Average Days to Bottom: Approximately 21–28 days (3–4 weeks) Average Days to Full Recovery: Approximately 28–45 days (back to pre-conflict levels) Event Start Date Max Drawdown (S&P 500) Days to Recovery Pearl Harbor Dec 1941...
News just keeps coming. Today employment numbers were released showing a loss of 92,000 jobs, with the unemployment rate ticking higher. Wage growth was still ok, keeping up with inflation. Job losses were reported across the board. With inflation persisting and job numbers weakening, the Fed is caught between a rock and a hard place. As we have discussed previously regarding inflation and Federal Reserve policy, this type of environment makes policy decisions increasingly difficult...
