Equity and Bond Markets Disagree
Markets have once again demonstrated remarkable resilience as the dual threats of inflation and war did not prevent equity markets from rallying for the second week in a row. One interesting perspective is that the bond markets continue to show some distress (see the green line in the chart below) even while equity markets advance.…
Market Commentary – Nothing Has Changed
The stock market is a fickle barometer of the economy, for sure, swinging wildly in the short term as it grapples with the latest information. This process can be thought of as a mechanism looking to find equilibrium; moving around a great deal when uncertainty is high. This fittingly describes current market conditions. As we…
All Eyes on the Fed This Week
This week should bring some clarity around a couple of the issues that have been causing some of the stock market weakness. But I do not expect the information to materially alter the current bear market nature of the market. Here’s a look at the equity markets for the week just past: Last week we…
All Eyes on Ukraine, Oil, and Inflation: Uncertainty Prevails
The Russian invasion of Ukraine has now been underway for 13 days. There is tremendous uncertainty surrounding the conflict, but one thing seems clear: the duration seems likely to extend for much longer than most experts thought it would when it began. The most important economic impact for the West is the impact of this…
Market Commentary: Russian Invasion
The war in Ukraine has brought additional uncertainty to a market dynamic that is already unsettled. The volatility, intraday reversals, and headline risk that have been present since the beginning of 2022 continue. And from our perspective, there isn’t much changing that will cause the uncertainty to abate. Our view is that the Russian invasion…
What happened in the week just past?
As we said in our note a week ago, the CPI report would be a meaningful data point for the markets. Unfortunately, the print for inflation was higher than the 7.2% expected annual rate. Inflation came in at 7.5%, spooking markets and truncating what appeared to be an attempt by equity markets to rally to…
Market Volatility: Earnings Reports and Inflation Worries
Recently we have been discussing higher market volatility as market participants attempt to understand the inflationary threat (its duration and magnitude) and the Fed’s response. Uncertainty about these things is really at the heart of recently higher market volatility: uncertainty leads to volatility. The chart below plots the major Equity Indices for the week. In…
Volatility as Markets Seek Equalibrium
In our year-end commentary just a month ago we observed that equity markets had experienced strong returns for many years primarily due to extremely supportive Fed policies. The consequent more-than-decade-long bull run resulted in extended equity valuation levels. While we acknowledged strong corporate earnings had contributed substantially to the equity bull market, we nonetheless made…
Investment Team Notes – Market Comments and Rebalancing Notice
Many folks are glued to the screen today watching some interesting market moves. We are too, but we’ve also built the Smarter Portfolios to insulate against some of the micro drama that happens day-to-day. We’ve been speaking recently of the concentration within many of the major indices and are seeing pullback in some big technology…
Year End Market Commentary
Well, that was a wild one. Here’s a bullet-point recap of the year 2021 through the “economic lens”: Continuing Covid pandemic with waves of new variants passing through the population. Negative bond returns. Recovering GDP and corporate earnings. Highly supportive Fed and record money supply. INFLATION with no end in sight. US stock market leads…
Fed Inflation Policy Shift
Inflation and the Fed’s actions to combat it will arguably be the main topic of discussion for the next ten days. On December 10th, the Bureau of Labor Statistics will release the November CPI data. Between May and September 2021, year over year CPI and Core CPI (CPI less Food and Energy) had stayed between…
Bond Vigilantes Ride – Q1 Market Commentary
We began the first quarter with a sobering message, stating that after several good years (with a punctuated but brief COVID scare) that the investment climate was going to change. We suggested it would be good for people to temper their capital market expectations considering: 1) high stock market valuations, 2) high inflation, and 3)…