The biggest news this week is Wednesday’s announcement from the Federal Reserve about the direction of interest rates, will they cut, raise, or hold. Last week’s inflation data strongly suggests the Fed will hold rates unchanged, but the weakness in the other data points is fuel to the fire that the Fed needs a cut to keep the economy on a smooth path.
Read MoreThe second week of February means the end of baseball’s Hot Stove League, or the offseason, when trades and free agents get new- and sometimes sizeable- contracts and marks the start of Spring Training. The new contracts and trades are often based on historical numbers of the players and projections that those players will live up to or improve on the historical numbers.
Read MoreThe goal in every sports league is to be among the best teams and make it into the playoffs and ultimately win the leagues championship. Since 2019, the Los Angeles Dodgers own the most overall wins in baseball and were the favorite or one of the two favorites to win the World Series each year.
Read MoreWe know in the Pacific Northwest, rain is a fact of life, more so in the winter and spring than in the summer, it does rain in the summer but that is not the normal day. A normal summer gives us lots of sun with rain occasionally, whereas winter supplies us with lots of clouds and rain and bits of sun. Over a full summer we are not disappointed over the amount of sun we get, this is the “long-term”, and this is climate.
Read MoreThe past two weeks were full of reports on the current state and outlook for the U.S. and global economies. Perhaps most importantly, the updated inflation data gave a more optimistic outlook for future Fed moves. Also, the key U.S. service sector activity index unexpectedly improved in November.
Read MoreAfter a brief hiatus, we return following a week with few economic and market reports. That is not to say that the week was without news, most notably when Fed Chair Jerome Powell spoke Thursday and spooked the markets with the comment that the Fed is a long way from done in its fight against inflation.
Read MoreInflation is the driving force behind the rate increases that the Federal Reserve has presented since March 2022. Inflation peaked in summer 2022, and it has been cut by more than half since the Fed raised rates from the range of 0.0%-0.25% to the range of 5.25%-5.5%, a more than 20-fold increase.
Read MoreOctober has the reputation as a terror for the capital markets. October 1929 is seen as the start of the bear market of the Great Depression. October 1987 holds the record for the largest single day plunge when the market fell more than 22%. Leading into October this year, there were reasons to believe we could see a return of the October Terrors.
Read MoreLast week’s economic reports were highlighted by Friday’s personal consumption expenditures report. This report showed consumer spending remained strong, but inflation, excluding food and energy, was below expectations. Also released last week was the final estimate for second quarter gross domestic product growth and initial jobless claims, both below expectations.
Read MoreEconomic forecasts are known to be wrong most of the time. Even the best forecasters suffer through periods of incorrect predictions. There are many reasons why this is the case. Sometimes the forecaster does not include needed data, a surprise event, either positive or negative, could move the economy away from the expected path and overconfidence of the forecaster.
Read MoreEconomic reports that were published last week gave us a glimpse of the health of the economy and maybe an indication of what the Fed will do at their meeting this week. Both consumer and business reports suggest the economy is performing better than expected. On the other hand, inflation exceeded expectations, which is not a positive for the outlook. In total, though, the reports painted an optimistic picture of the economy.
Read MoreOn August 1, Fitch Ratings downgraded the U.S.’s long-term default rating to AA+ from AAA. Fitch cited an “expected deterioration over the next three years”, a high and growing debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades.
Read MoreThe effect of bank runs will typically play out over weeks and months and the expectation is the deposit run on Silicon Valley and Signature Banks will be no different. The collapse of these two banks does not equal that of the Financial Crisis of 2007-2009, but the underlying reason is the same: an evaporation of confidence in first, the banks themselves and, second, in the banking system overall.
Read MoreFriday morning, the FDIC took control of Silicon Valley Bank (SVB) following a massive outflow of deposits. SVB’s customers were largely start-up tech companies with a high need for cash to fund operations. These companies held deposits with SVB but the high need for cash required an outflow of deposits from SVB. To meet the deposit outflows, SVB was forced to sell bonds from their securities portfolio and within the last few weeks, SVB sold $21 billion of Treasuries with an attached loss of $1.8 billion.
Read MoreYesterday was Valentine's Day. This is typically a day when we receive notes of affection, and some may receive flowers and chocolates. The government though, gifted us inflation data and it was not warm and fuzzy as the day would demand.
Read MoreIn January’s ViewPoints, I offered an outlook for a mild recession and struggling equity markets the first half of the year. I pointed out that the outlook was likely to be proven wrong partly because at least one unforecastable event is likely. I did not note that the forecasts could be wrong simply because it’s wrong.
Read MoreThe end of a year invariably brings forecasts of how the economy and markets will perform in the coming year. The forecasts include estimates of gross domestic product growth, the price level equity markets and interest rates in twelve months. With forecasters being so wrong in the past, could they be wrong again?
Read More
