Could a credit event derail the equity bull?

Is the soft landing here? Wall Street strategists have been racing to reduce their recession odds in the last week. More importantly, Fed Chair Powell revealed during the post-FOMC meeting press conference that Fed staff had upgraded its forecast from a mild recession in H2 2023 to no recession.   In the past few weeks,...

It’ll feel like a tightening every meeting

Mid-week market update: As expected, The Fed raised rates by a quarter-point and hinted that it will pause rate hikes at the next meeting, but underlined its conviction that it will not cut this year. Fed Funds expectations are largely unchanged after the meeting. The market is expecting a pause and cuts later this year....

Between the Scylla of inflation and Charybdis of financial instability

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...

Banking panic: Another GFC or buying opportunity?

Mid-week market update: Just when you thought the Treasury Department, FDIC, and the Fed had the SVB debacle fixed, the market plunged today on the news that the largest shareholder of Credit Suisse had declined to inject further equity into the troubled bank. This is what a bank panic looks like. Financial stocks in the...

Trading the SVB panic

I know that financial stocks are more than just banks, they include financial conglomerates like American Express, broker-dealers, life and property and casualty insurers, and so on. But mark this day. This will be a financial panic to tell your grandchildren about. As the chart shows, the technical damage to the sector is considerable.  ...

Can a bull market begin without the banks?

Earnings season has kicked off with reports from the major banks. The market reaction has been mixed so far. From a big picture perspective, history shows that whenever the relative performance of banking stocks have breached a major support level, such events have usually signaled periods of financial stress and bear markets.     This...

Adventures in banking

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...

Scary Halloween story: How a weak USD could hand China a major victory

I have written before how a strong USD can be a negative for global financial stability. There are  many EM borrowers who have borrowed in the offshore USD market, and a rising USD puts a strain on their finances. In addition, FactSet reported that companies with foreign domestic exposure have exhibited worse sales growth than...

How to watch for signs of another Lehman Crisis

It has been 10 years since the Lehman bankruptcy, which became the trigger for the Great Financial Crisis (GFC). The financial press has been full of retrospective stories of what happened, and discussions from key players. The GFC was an enormous shock to investor confidence. Ever since that event, many investors have been living with...