If, by chance, you’re not familiar with my work, I focus on the Federal Reserve System. That’s the formal name for the central bank of the United States, most often referred to simply as “the Fed.” Those who are familiar with my work might even say it’s a bit of an obsession for me, and they might not be wrong. The Fed is no small thing. It drives monetary policy, guided by a “dual mandate:”: by following a dual mandate: maximize jobs and wages and stabilize prices. Since the U.S. dollar is currently the world’s reserve currency, policy decisions made by the Fed impact not just the relative strength of the dollar but also ...
Completing a busy day of US economic data, Industrial Production was, like retail sales and inflation data, highly disappointing. Prior months were revised slightly lower, leaving IP year-over-year up just 2% in June 2017 (estimates for May were initially 2.2%). Revisions included, the annual growth rate has been stuck around 2% now for three months in a row, suggesting like those other accounts a pause or even possible end to the mini-improvement cycle. The trajectory for US industry on the plus side now continues to undershoot both the 2002-03 as well as the 1992-93 “jobless recoveries.” In that respect, Industrial Production has yet...
As the second-quarter reporting cycle gets underway, investors would look to add stocks that have the potential to surpass earnings expectations in the quarter. This is because an earnings beat generally leads to stock price appreciation. Investors, after all, are driven by the sole objective of generating handsome returns from their portfolio. None of them want their hard-earned money to go down the drain. However, the task of including potential outperformers in one’s portfolio is not an easy one. In fact, equity market tricks are not easy to master with a deluge of stocks flooding the space at any point of time. The task becomes even mor...
With Janet Yellen’s testimony behind us, the next big focus for the forex market will be the European Central Bank’s monetary policy meeting. After rising to a 1 year high of 1.1490, EUR/USD struggled to extend its gains above 1.15. Investors worry that Mario Draghi will disappoint in the same way as Janet Yellen. Draghi’s comments last month took euro to a 1 year high versus the U.S. dollar and now everyone will be tuning into the ECB press conference to see whether his hawkishness is repeated or downplayed. We believe that the European Central Bank has already set the course for their next policy change. Its no secret that they pre...
With Janet Yellen’s testimony behind us, the next big focus for the forex market will be the European Central Bank’s monetary policy meeting. After rising to a 1 year high of 1.1490, EUR/USD struggled to extend its gains above 1.15. Investors worry that Mario Draghi will disappoint in the same way as Janet Yellen. Draghi’s comments last month took euro to a 1 year high versus the U.S. dollar and now everyone will be tuning into the ECB press conference to see whether his hawkishness is repeated or downplayed. We believe that the European Central Bank has already set the course for their next policy change. Its no secret that they pre...
As far as the markets go, they’ve had an incredible run since 2009. That’s because the Federal Reserve bought more than $4 trillion worth of bonds and securities in the open market to flatten interest rates and buoy said markets. But going forward, starting in September, the Fed’s stopping its monthly purchases of billions of dollars’ worth of bonds… And that could send the markets into a tailspin. Today, I’m covering what Fed Chair Janet Yellen said in her Humphrey-Hawkins testimony to Congress this week. More importantly, I’m covering what she didn’t say, and what could happen starting in September. If you own stocks, you’...
When discussing government involvement in the health sector, I usually focus on the budgetary implications. Which makes sense since I’m a fiscal wonk and programs such as Medicare, Medicaid, and Obamacare are diverting ever-larger amounts of money from the economy’s productive sector. I also look at the tax side of the fiscal equation and complain about how the healthcare exclusion mucks up the tax code. Though it’s important to understand that government involvement doesn’t just cause fiscal damage. All these programs and policies contribute to the “third-party payer” problem, which exists when people make purchases with ot...
Overheard everywhere today… Stocks (Dow and S&P) hit record intraday highs… (must mean everything is awesome, right?) With Nasdaq’s best week of 2017… So clearly, unlike The Leftists, Trump Jr’s email means absolutely nothing… BUT… This morning’s terrible retail sales and inflation data sent ‘hard’ data to new post-Trump lows – lowest since May 2015 – as ‘soft’ data clings to hope once again, sending ‘animal spirits’ back near record highs… GDP expectations have plunged… And then there is this… Short Interest in the S&P ...
And that’s the week ladies and gentlemen. A dovish Yellen on Capitol Hill largely offsetting the rate hike from Poloz, a couple of ECB leaks to make sure the messaging is “just right”, and (another) miss on the CPI print which promptly pushed the odds of a September hike below 10%: The S&P hit a record on this “sign-of-the-times-ish” headline: “Tepid Inflation Ignites Rally”… The VIX is back to a 9-handle (of course)… Yields plunged on Yellen’s prepared remarks and again on the CPI miss: Gold rose to a two-week high: Crude was its usual batshit crazy self with the now customary API/ EIA pump-n-dump/ dump-n-pump (the or...
It was only a month ago Fed President Dudley was lecturing us about the dangers of overly easy financial conditions and how inflation’s sanguine performance was “transitory.” And it wasn’t like he was alone. The Fed’s generally accepted second in command, Stanley Fischer, echoed similar comments. Well, this morning about the most awkward economic news possible was released. CPI undershot, coming in at 1.6% instead of the expected 1.7%. Retail sales were abysmal, registering -0.2% instead of the forecasted 0.1% gain. And the University of Michigan sentiment numbers reflected a public who is becoming increasingly skeptical of the Fed...