Pullback or Something More?
This current market sell off is the first material pullback in the US stock market since it began advancing in the Fall of 2023. You can see from the chart below, until the recent pullback, the stock market, as measured by the S&P 500 Index, was on a tear. The recent sell-off has taken the…
Inflation dynamics in one chart
Last week inflation was updated for the month of March. In short, inflation progress has stalled both on the Consumer Price Index (CPI) and the Producer Price Index (PPI). We’ve been saying that inflation is primarily a consequence of money supply and policies that affect money supply. The chart below shows three series: 1) the…
Competing Policies and Forces
We’ve dedicated a considerable amount of attention within our weekly written missives addressing inflation. Of late, inflation has stalled even while Federal Reserve policies remain restrictive. Here’s what the two Fed tools of interest rates and balance sheet assets looks like: As can be seen, the Fed has been forceful and relentless in its pursuit…
That’s a wrap!
First Quarter 2024 Market Recap The first quarter of 2024 is in the books. For the US Equity markets, it was the strongest first quarter since 2019. Immediately below is a chart of the major US Indices. We see the S&P 500 Index leading, and closely followed by the NASDAQ Composite Index. The Russell 2000…
Why inflation stays stubbornly high
Inflation Update Last week we received two updated inflation readings. The consumer price index is stubbornly holding steady at slightly over 3% year-over-year. Please see the chart immediately below. Meanwhile, the more volatile producer price index (commodities) is trending higher. See the image immediately below. What are we to make of these readings? Foremost, the…
Market Breadth: Is a Transformation Underway?
The narrow nature of market returns over the past year is well documented. In summary, the largest capitalization tech stocks (the so-called Mag 7) have dominated market returns since the market correction bottomed out in late 2022. Directly in the chart below is how the various index returns looked since October 2022. The S&P 500…
Animal Spirits?
Animal spirits refer to the emotional and instinctive factors that influence human behavior in investment decision-making. It encapsulates the irrational aspects of human psychology such as optimism, fear, and herd mentality, which can drive market trends and deviate from rational economic models. Essentially, the basic idea supporting the role of animal spirits in asset pricing…
Priced for Perfection
Immediately below are a series of stock market index returns for the year-to-date period ended February 23, 2024. The S&P and NASDAQ are in a dead heat lead while other indexes lag. Here are the big takeaways from the chart below. 1) The equally weighted S&P 500 Index lags the S&P by 4.5%. This is…
Inflation Progress has Stalled – WHY?
There were two inflation readings released this week (CPI and PPI) that threw cold water on the idea the inflation fight is all but over and that the Fed would soon be lowering interest rates. In response, bond yields spiked and stocks retreated for the first time in five weeks. Below is a graph of…
Curb Your Enthusiasm
The stock market is on fire and the Mag Seven are rising in anticipation of strong AI induced earnings gains. Nowhere is this more apparent than in the PE valuations of large cap technology stocks like META, Alphabet, Nvidia, Amazon, Apple, and Microsoft. With all the hype and stratospheric expectations, sometimes it is important to…
“The Dude Abides.”
In the 1998 cult classic film “The Big Lebowski,” Jeff Bridges’s iconic character “The Dude” frequently quips “The Dude Abides.” What is meant by this phrase? Succinctly, it means as chaos swirls around him, the Dude remains steadfast and constant in his approach to life and living. It seems to us that the same thing…
Corporate Earnings: Growth and Optimism amid the AI revolution
We hear so much in the financial media about inflation, slowing economic output, and the Fed’s inflation fighting efforts, that it’s easy for people to become overly pessimistic. We are even hearing about the threat of the 1970’s bugaboo “stagflation.” While it is true that we still have persistent inflation and economic growth isn’t as…