A Fed Balance Sheet Primer: One Trillion Down… Six to Go?
Below is a picture of the Fed Balance sheet. These are the assets held on the Fed Balance Sheet. This is the economic tool the Fed started using as a policy tool during the Great Financial Crisis. The balance sheet amounts to a mechanism through which the Fed can add or subtract liquidity (i.e.,…
The AI Goldrush
The Generative AI ERA is upon us. With Microsoft Corporation’s acquisition of OpenAI and the company’s ChatGPT Generative AI language model then being infused into Microsoft’s software suite this year, an AI competitive race has begun. Companies and solutions that harness AI and introduce large scale efficiency and productivity into the economic landscape are…
Befuddling Markets So Far This Year
In years like 2023 that are marked by excessively narrow returns (only a handful of stocks are driving broad index returns) it can be helpful for people to understand the market undercurrents…. particularly for those who hold the stocks that have not participated in the rally. First, let’s consider the third quarter 2023. Here’s…
The US Federal Financial House: A Sobering Reality
This week we are taking the opportunity to examine the financial well-being of the US Federal Government. Considering Fitch’s recent downgrade on the financial rating of the US government as well as the upcoming potential for yet another government shutdown due to the ridiculous political process through which the US government is funded, this…
Some Longer-Term Perspective
It’s easy to get caught up in the short-term market action. What happened to stock markets this week? Are earnings better or worse than expected? Are we headed into recession? It is presently an admittedly interesting time with the economic uncertainty about inflation, recession, and the Fed’s tightening policies. Also, we have the fervor…
Inflation Readings This Week
Below are the inflation readings through the end of June, 2023. The blue line represents the year-over-year change in consumer prices while the red line represents the change in producer prices (commodities). One can see progress has been made on the inflationary front since the Fed began its tightening campaign in March of 2022…
A Market Pullback or Something More?
Here’s a chart below of the S&P 500 Index (in yellow), the NASDAQ Composite Index (in purple) and the Bloomberg Aggregate US Bond index (in blue) since the end of June. At the midway point of the third quarter and after most companies have reported earnings, the capital markets are retracing some of their…
The Return of The Money Market Fund
Over the past year and a half, the return potential of the capital markets has dramatically shifted. At the start of 2022, interest rates were essentially zero. At that time, investors could not make any meaningful interest-based returns in bank savings accounts, US government bonds, municipal bonds, or money market funds. To make any…
Half Full or Half Empty?
With 84% of S&P 500 Index companies having reported earnings, according to Factset, we now have a good idea about how second quarter earnings will come in. While 79% of those companies have beaten earnings estimates, it is important to know two things: 1) Those earnings estimates have been systematically reduced in the preceding months,…
The Goldilocks Outcome: The Relationship Between Money Supply, Output and Inflation
August 1, 2023 Let’s do some careful and thoughtful inquiry into the relationship between money supply and key economic data. First, let’s isolate the money supply and see what the rate of change from the prior year over time has been, beginning in 1980. Here’s what it looks like: One can see…
An Earnings Quick Take
July 25, 2023 As we noted last week, we are in the second quarter earnings reporting season. So far, according to FactSet, 18% of S&P 500 Index companies have reported. While the majority are reporting positive revenue and earnings surprises. But before becoming too ebullient, please keep in mind these surprises are coming in…
Earnings in Focus
Approximately 2,300 publicly traded companies will report earnings this week. As such, it is a big week for earnings and by the end of it, we should have a good read on the overall tenor of earnings for the quarter ended September 30th. This is a pivotal quarter because the aggregated analyst estimates for…