Ever since the softer-than-expected June CPI report, the Wall Street narrative has pivoted toward disinflation and a soft landing. The disinflationary trend had been building for some time and inflation has been surprising to the downside around the world. As a consequence, the markets have taken a risk-on tone in anticipation of less...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend...
The Q2 earnings reporting season could be a pivotal one. Earnings reports and subsequent corporate guidance are likely to give investors greater clarity on whether the economy is softening into a slowdown or undergoing a soft landing and recovery. The preliminary picture is a fragile recovery. Forward guidance for Q2 has improved from Q1. Negative...
I’ve been thinking about the nonfarm payroll report that was reported on Friday. Employment has been gradually slipping from a 5 and 8 handle to about 200K today. The June headline payroll report came in at 209K, which was under consensus expectations. The big surprise was the decline in the unemployment rate. ...
I recently had a discussion with a reader about my Ultimate Market Timing Model (UMTM). The UMTM is an extremely low turnover model that flashes signals once every few years and is designed to limit the extremes of the downside tail-risk of owning equities. When extreme downside risk is minimized, investors can afford to take...
I found this recent CNBC interview with former Obama CEA Chair Jason Furman on June 6 rather disturbing. Furman expressed the opinion that the Fed would need to raise rates by 50 basis points before the rate hike cycle is complete, though he believed that it would skip a hike at the June FOMC meeting. ...
Is the U.S. economy headed into recession? The signs are all there. Even though a recession isn’t part of the Fed’s official forecast, Fed Chair Jerome Powell conceded during the May post-FOMC press conference that the Fed’s staff economists were calling for a mild recession. Carl Quintanilla of CNBC also reported that the overwhelming...
In case you missed it, the 10-year Treasury yield fell and broke a technical support level even as the 3-month T-Bill yield rose. This left the 10-year to 3-month yield spread inverted further, which has historically been a strong recession signal. The 10-year and 3-month Treasury yield spread has inverted before every...
Mid-week market update: I know that we mostly focus on the outlook for the stock market in these pages, but investors should cast their eyes on the bond market once in a while, as they might learn something. Bond prices staged an upside breakout, which is a signal of economic weakness. As the...
One of these cyclical indicators is not like the others. While many cyclical industries are in relative uptrends, which is a technical signal of economic expansion, the 2s10s yield curve is deeply inverted and shows few signs of steepening. This is one of those occasions when the stock market and bond markets disagree. ...
In addition to the hot January PCE print, the other surprise of last week was the upbeat flash PMI from S&P Global Market Intelligence (formerly IHS Markit) showing upside surprises from the G4 industrialized countries. Increasingly, the market narrative is shifting from a growth slowdown to no recession and continued growth. The markets are behaving...
I've been trying to make sense of the blowout January Jobs Report. BLS reported a Nonfarm Payroll gain of 517,000, which was an off-the-charts surprise compared to market expectations of 185,000. Whenever large surprises occur, it makes me think that the report represents a data blip. For some perspective, the 517,000 gain represents an...
The main event last week for US investors was the FOMC decision. As expected, the Fed raised rates by a quarter-point and underlined that "ongoing increases in the target range will be appropriate". Powell went on to clarify that "ongoing increases" translated to a "couple" of rate hikes, which would put the terminal rate at...
As investors look ahead to the FOMC decision on February 1, the market is expecting two consecutive quarter-point rate hikes, followed by a plateau, and a rate cut in late 2023. The rate hike path and subsequent pause are consistent with the Fed's communication policy. Already, the Bank of Canada raised rates by...
Fed Chair Jerome Powell made it clear at the post-FOMC press conference. The Federal Reserve is nowhere close to ending its campaign of rate increases. While last two CPI reports show "a welcome reduction in the monthly pace of price increases...It will take substantially more evidence to have confidence that inflation is on a sustained downward path."...
I highlighted a widening gulf between the technical and macro outlook in August (see "Price leads fundamentals", or "Don't fight the Fed"?). At the time, the technical indicators were wildly bullish because of strong price momentum, while the macro outlook was cautious. The macro view eventually won out. A similar divide may be appearing...
The performance of balanced funds has become especially challenging in 2022. In most recessionary equity bear markets, falling stock prices were offset by rising bond prices or falling bond yields. The fixed income component of a balanced fund portfolio has usually acted as a counterweight to equities. Not so in 2022. You would...
In the wake of the November FOMC meeting, Fed Chair Jerome Powell summarized Fed policy very clearly with two statements: "We will stay the course until the job is done". He added, "It is very premature to think about pausing (rate hikes)". It was a hawkish message, though Fed Funds expectations were largely unchanged...
Many technical analysts turned excited in late August when the percentage of S&P 500 stocks above their 50 dma surged from below 5% to over 90%. Historically, such breadth and momentum thrusts have signaled a fresh bull market with a track record of 100% accuracy. Since then, the percentage of stocks above their...
Both the Fed and FedEx had messages of recession for the markets. Fed Chair Jerome Powell said that the Fed would raise rates until there was clear and convincing signs that inflation was headed toward its 2% target, and its projections amounted to a recession that begins either late this year or early next year....
Our site uses cookies and other technologies so that we, and our partners, can remember you and tailor your user experience on our site. See our disclaimer page on our privacy policy, how we manage cookies, and how to opt out. Further use of this site will be considered consent.
