To foresee what crisis might be next, it is vital to understand the dollar's role in global finance and economics and the resulting role that the Fed plays in influencing global monetary policy.
About 90% of this year’s S&P 500 loss was attributable to higher interest rates.
Bond yields may keep rising, but a significant driver of yields is done selling.
I look back to other periods when bonds outperformed stocks. This analysis allows us to assess specific stock traits and specific industries that over- and underperformed in those eras.
With Treasury yields around 4% and corporate bonds yields even higher, fixed income is the better alternative to stocks.
If one is watching CNBC to figure out where markets are headed, they will be better served looking to the bond market for direction.
In the long run, stock prices and returns are anchored by the cash flows that companies provide investors. If profits grow slower than expected, stock return projections must be recalibrated.
The leading tail-risk potential is the increased odds that high inflation remains stubborn, and the Fed continues to fight those odds aggressively.
When the supply and demand for bonds normalize, bond investors will realize that economic, inflation and other factors warrant much lower yields.
I explore consumer staple and discretionary companies to see how they are navigating the inflation storm.
This article considers a change in behavior that would generate a price-wage spiral.
The S&P 500 could be close to 3,500 by year-end if the Fed follows through with its QT plans.
Stocks are rallying on hopes the Fed will stop increasing interest rates this fall, pivot, and start reducing them next year. Investors are blindly buying into this pivot narrative.
Given the Fed's enormous impact on markets and its extremely hawkish stance due to inflation, a well-reasoned inflation forecast is imperative for investors.
The market’s inflation concerns are taking a back seat to recession fears.
Valuations help investors gauge the downside risk and upside potential in a stock or market. At the same time, assessing liquidity conditions, including technical analysis, defining short term trends help with investment timing and asset selection.
While the situations in the U.S., Europe, and Japan are different, all three are paying the price for years of fiscal and monetary tomfoolery. Using monetary policy to ensure low-interest rates encouraged unproductive debt growth. As liabilities grew faster than GDP, their ability to service debt became harder without continually having to administer lower interest rates and more QE.
The trolley car problem is a well-known ethical question that forces one to choose between two poor consequences. For the Fed, it is whether to allow inflation to fester or to force the economy into a recession.
Given the Fed's hawkish monetary policy agenda and its effect on asset prices, I thought it might be helpful to share my thoughts on Fed-based trend analysis.
Recent experience shows that a third mandate – preventing financial instability – trumps the Fed’s two congressional mandates of full employment and low inflation.
Will the plight of consumers drag GDP lower in the second quarter, resulting in a recession?
The tale of Bear Stearns’ rally and investors' myopic vision in the spring of 2008 is a valuable lesson for today.
Recent warnings from corporate executives and rapidly declining regional manufacturing surveys make me wonder if a recession has already started.
The terms "value" and "growth" have been blurred. What appears to be a value stock may be in its reputation only.
Liquidity is fading due to the Fed, and therefore volatility is on the rise. Illiquid and volatile markets are not conducive to long-term wealth generation.
The BOJ is trapped. It is conducting unlimited QE to keep rates low and weaken the yen, which promotes inflation.
In propping up Japan's economy and financial markets, its central bank indirectly provided liquidity to the world's financial markets. But the BOJ could unleash a liquidity vacuum felt around the world.
Does a risk-free bond with 7% yield interest you? If so, read about the red-headed stepchild of the bond world that is finally attracting investors.
The more the Fed decides to dance with inflation and ignore the bond market and economy, the more we should expect stock prices to fall.
This article explores the problem vexing Russia and its trade partners. I explore how the threat and use of sanctions may force some countries to contemplate weaning off the world's reserve currency.
With QE finished and QT on the horizon, I answer a few questions to help you better appreciate what QT is, how it will operate, and discuss how draining liquidity will affect markets.
Filling out your March Madness bracket provides insight into how investors select assets, structure portfolios, and react during volatile market periods.
The Windfall Profits Tax Bill doesn’t penalize energy companies. It punishes consumers with more inflation. Further, it uses a faulty assumption to help gain support from the public.
While higher gas prices may be welcome news to the oil industry, the rest of us should be concerned. It is a glaring recession warning. Over the last 40 years, higher gas prices have been linked to economic stagnation and recessions.
Fiscal spending is normalizing quickly, and the Fed is warning investors it is ready to remove the stimulus. Such a reversal of monetary and fiscal liquidity does not guarantee a reversal of asset prices, but the odds of a bear market are increasing.
I propose a strategy that can produce larger price gains or losses than bonds and higher yields than traditional bond funds or ETFs. If yields decline soon, investors can expect double-digit returns in a relatively short period.
The term “value” is being grossly misapplied.
The strike price on the Fed put has moved significantly. The Fed may sit idly by if markets voice displeasure with abrupt changes in monetary policy.
I examine two biases that often handcuff investors and push them to make the wrong decisions at the wrong time.
The Fed is walking a tightrope between instability and inflation. Can it successfully tame inflation without causing severe market dislocations?
Stocks are priced for perfection. Bonds trade at historically low yields despite 7% inflation. What could go wrong?
While no one knows what 2022 holds in store for investors, my concern is that it should not foster the same optimism as 2021.
MMT offers a new "logic" that allows the government to spend without facing the traditional constraints of debts and deficits. Is MMT too good to be true?
The dollar is on the rise, and with it comes underappreciated consequences.
Investors have no idea the most considerable risk to their portfolio is if the Fed cannot continue to be a market magician.
This article contrasts the valuations and environments now and in 2000 to ask if it's time to leave the party or stay and rock on. I provide a statistical analysis showing the downside risk facing the S&P 500.
The economy is at maximum employment. Inflation is running red hot and increasingly showing signs it is persistent. Having neglected one mandate and largely fulfilled the other, why is the Fed so slow to reduce asset purchases and unwilling to contemplate hiking interest rates?
If easy money is the bedrock of valuations and the Fed is getting ready to shift the bedrock, investors best pay attention to market forecasts and how the Fed ultimately acts.
Is the Fed’s aggressive policy, which purposely goes against its mandate, hiding something?
Given record profit margins and valuations, there is little upside, especially if inflation remains problematic. Throw stagflation into the formula, and the outlook is bleak.