Mid-week market update: Investors and traders have been waiting for the moment of the FOMC announcement and subsequent press conference. How does the Fed respond to the twin challenges of a banking John Authers highlighted analysis from Bespoke indicating the market was entering a period of extreme volatility in Fed Funds futures. The...
In response to the recent financial turmoil, Fed Funds futures is discounting a 25 bps hike at next week's FOMC meeting, followed by a brief peak and rapid rate cuts for the rest of the year. Are those market expectations realistic? How will the Fed navigate between the Scylla of inflation and Charybdis...
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...
On Valentine's Day, the European Central Bank tweeted a poem to underscore its commitment to fighting inflation. The ECB tweet is also indicative of the tight monetary policy undertaken by most major central banks. Only two central banks, the BoJ and the PBoC, are meaningful suppliers of global liquidity. The rest are raising...
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...
Mid-week market update: The stock market reacted with a risk-on tone to the FOMC decision. The S&P 500 has staged an upside breakout through the 4100 level. While I am cautiously intermediate-term bullish, be warned that the initial reaction to FOMC decisions are often reversed the following day. Keep in mind that this...
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...
The stock market began 2023 with a rally based on the "green shoots" narrative of a Fed pivot and optimism about the effects of China reopening its economy. Since then, the S&P 500 rose to test resistance as defined by its falling trend line and pulled back. Similarly, the equal-weighted S&P 500, the mid-cap S&P...
IMF Managing Director Kristalina Georgieva recently said in a CBS Face the Nation interview that the IMF expects "one third of the world economy to be in recession". She went on to outline the differing outlooks for the three major trading blocs in the world, the US, EU, and China, plus emerging market economies. For most...
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."...
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...
Mid-week market update: In the long awaited Powell speech, the Fed Chair signaled, "It makes sense to moderate the pace of our rate increases...[and] the time for moderating the pace of rate increases may come as soon as the December meeting". The market reacted with a risk-on tone and began to discount a series of...
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 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...
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...
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...
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...
Ahead, of the upcoming FOMC, meeting, what is the market discounting? I conduct a factor and sector review for some answers. Starting with a multi-cap review of value and growth, value stocks have been outperforming growth stocks within large caps since early August, but this has not been confirmed by mid and small caps. The...
In light of the dismal performance in the first nine months of a 60/40 portfolio in 2022, it's time to ask, "What's changed and what adjustments should investors make to their portfolios?" The answer is inflation, and it's a game changer. The correlation between stocks and bond increasingly rise as inflation rises. In...
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