The headlines regarding Trump’s proposed tariffs and their inflationary consequences are undoubtedly worrying, but will they prove correct? Instead of taking the “experts” word, let’s consider how tariffs may affect the prices of all goods and services, not just the items subject to tariffs. Furthermore, it’s worth discussing how tariffs could impact the economy, as …

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When we discuss technical analysis in our articles and podcasts, we often examine the moving average convergence divergence indicator, better known as the MACD, or colloquially the Mac D. The MACD is one of our favored technical indicators to help forecast prices and manage risk. Accordingly, let’s learn more about the MACD to see how …

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Record deficit spending, soaring money supply, and inflation are among the likely responses we would hear from investors to the question of why gold is surging. Instead of presuming those or other market narratives about gold prices are correct, let’s analyze historical correlations between gold and economic and market data. In addition to helping you …

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Record deficit spending, soaring money supply, and inflation are among the likely responses we would hear from investors to the question of why gold is surging. Instead of presuming those or other market narratives about gold prices are correct, let’s analyze historical correlations between gold and economic and market data.

In addition to helping you better appreciate why gold is surging, our analysis will help you recognize that market narratives explaining asset price movements can be wrong, no matter how reasonable they may seem at first blush.

What Is Gold?

Gold is neither a claim on the promise of future earnings like a stock nor a liability owed by a public institution or a private party like a bond. Unlike currency, it lacks the full faith and credit of most

Can famed investors Paul Tudor Jones and Stan Druckenmiller, who recently proclaimed they are short bonds, thus betting on higher yields, be wrong? Instead of mindlessly assuming such legendary investors are correct, let’s do some homework. First, though, let’s remind ourselves that Paul Tudor Jones and Stanley Druckenmiller are known for their aggressive trading styles. …

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Can famed investors Paul Tudor Jones and Stan Druckenmiller, who recently proclaimed they are short bonds, thus betting on higher yields, be wrong? Instead of mindlessly assuming such legendary investors are correct, let’s do some homework.

First, though, let’s remind ourselves that Paul Tudor Jones and Stanley Druckenmiller are known for their aggressive trading styles. Therefore, we don’t know whether their bets are short term trades for a quick profit, or longer-term bets on significantly higher yields. Moreover, maybe their negative bond commentary is just “talking their books” to get traders and investors to follow them and boost their profits. Such a proven strategy by famous traders can be a recipe for losses by those who try to mimic their trades.

The recent 50-basis point

The Mayo Clinic defines Post Traumatic Stress Disorder, or PTSD, as “a mental health condition that’s caused by an extremely stressful or terrifying event — either being part of it or witnessing it.” Within the field of PTSD research is a concept called “memory inflation.” Memory inflation occurs when memories of traumatic events become more intense over time.   

Memory inflation of past events amplifies one’s emotions and behaviors. As we will discuss, distress from recent price inflation is causing many investors to overly fear that a similar situation will reoccur.

Given the tight relationship between inflation and bond yields, memory inflation negatively affects bond prices. Additionally, memory inflation may prevent some investors from seeing an opportunity to profit from the

The financial media frequently opines on what the daily gyrations of the VIX (implied volatility index) signal regarding investor sentiment. Despite how often it is quoted and discussed, many investors do not truly appreciate what implied volatility measures.

We take this opportunity to help you better understand implied volatility. Furthermore, we discuss other lesser-followed measures of implied volatility that help better assess whether implied VIX readings infer bullish or bearish sentiment. 

The timing of this article is essential as the VIX has been rising alongside the market in a non-typical fashion. With the presidential election in a few weeks, the Fed changing course on monetary policy, and Israel potentially attacking Iranian oil facilities, the increasing level of

Numerous reader requests following our article, Agency REITs For A Bull Steepener, prompted us to write this follow-up with more detail about how to analyze agency REITs. This article doesn’t recommend specific agency REITs, but it does lay out some of the fundamental basics of the largest publicly traded agency REITs. In doing so, this analysis and the prior article provide a solid foundation for further evaluating agency REITs.

Before diving in, it’s worth noting that most agency REITs offer preferred shares. While we do not discuss them in this article, preferred shares may also prove rewarding and less risky in the current bull-steepening interest rate environment. 

(Disclosure: RIA Advisors has a position in NLY and REM in its client portfolios.)

Managing A REIT

An agency

On September 18, 2024, the headlines read the Fed cut the Fed Funds rate by 50 basis points. At first blush, one would think that a trader with a crystal ball a couple of days before the Fed action would buy bonds and lick their chops over the money they would soon make. In this case, the crystal ball was a curse.

Bond yields rose following the rate cut despite what many investment professionals perceive to be a bullish event. If you scour the media, you will find rationales for the sell-off. Such includes the Fed stoking inflation or China’s massive stimulus package. In our opinion, it’s much more straightforward; it all comes down to context.

We were inspired to write this by a message asking us in disbelief if we had ever seen such an adverse bond market reaction to a rate cut.

In our recent two-part series on the yield curve (Part One  Part Two) we discussed the four predominant yield curve shifts and what they imply about economic activity and monetary policy. Additionally, given the current bullish steepening trend of the yield curve, we provided data on how prior bull steepening environments impacted various stock indexes, sectors, and factors. Missing from our analysis was a discussion of a specific type of REIT whose valuations are well correlated with the shape of the yield curve. If you are buying this bull steepener, agency REITs are worth your consideration.

What is an Agency Mortgage REIT?

REITs own, manage, or hold the debt on income-producing properties. REITs must pay out at least 90% of their taxable profits to shareholders annually. This

Not surprisingly, Donald Trump and Kamala Harris are taking opposite approaches to modifying the corporate tax code. If enacted, both proposals would significantly impact corporate profits and, thus, share prices.

We have written many articles and commentaries forecasting interest rates. The analysis has used prior and current inflation and economic activity. Additionally, we have looked at market data on inflation expectations, Fed Funds futures, and other factors that influence interest rates. Today, we add an unorthodox factor to the list: cash cows.

This article introduces a unique way to imply where dividend investors think interest rates will be in the future. The impetus for this article came from a recent SimpleVisor Friday Favorites article in which we reviewed the Campbell Soup Company (CPB). Friday Favorites typically analyzes a company’s fundamental and technical conditions and valuations.

This time, however, because the company was a cash cow, we took it further and studied its

Part One of this article described the burgeoning bull steepening yield curve environment and what it implies about economic growth and Fed policy. It also discussed the three other predominant types of yield curve shifts and what they suggest for the economy and Fed policy.

Persistent yield curve shifts tend to correlate with different stock performances. With the odds growing that a long bull steepening may be upon us, it’s incumbent upon us to quantify how various stock indices, sectors, and factors have done during similar yield curve movements.

Limiting Losses With Yield Curve Analysis

Stocks spend a lot more time trending upward than downward. However, in those relatively brief periods where longer-term bearish trends endure, investors are advised to take steps to reduce

The level of U.S. Treasury yields and the changing shape of the Treasury yield curve provide investors with critical feedback regarding the market’s expectations for economic growth, inflation, and monetary policy. Short- and long-term yields have recently fallen, with short-term maturities leading the charge. The changes result in what bond traders call a bull steepening yield curve shift. The shift is due to weakening economic conditions, moderating inflation, and the increasing likelihood that the Fed will lower rates.

Yield curves are essential indicators that bond investors closely follow. However, many stock investors do not track yield curves despite the importance of bond yields on stock returns. Therefore, in this two-part series, we start with an introductory discussion of

Profitable bond trading opportunities arise when your expectations about Fed policy differ from those of the market. Therefore, with the Fed seemingly embarking on a series of interest rate cuts, it behooves us to appreciate how many interest rate cuts the Fed Funds futures market expects and over what period. Equally important, Fed Funds futures help us assess the market’s economic growth and inflation expectations.

Currently, Fed Funds futures imply the Fed will start cutting rates in September and reduce them by 2.25% to 3.09% in early 2026. From that point, the market expects the Fed to slowly increase Fed Funds to 3.50%. The limited rate cuts and relatively high trough in Fed Funds tell us the market is not pricing in a recession but a normalization of GDP with inflation running

A recent article co-authored by Stephen Miran and Dr. Nouriel Roubini, aka Dr. Doom, accuses the U.S. Treasury Department of using its debt-issuance powers to manipulate financial conditions. They liken recent Treasury debt issuance decisions to stealth QE. Per the first paragraph of the article’s executive summary:

By adjusting the maturity profile of its debt issuance, the Treasury is dynamically managing financial conditions and through them, the economy, usurping core functions of the Federal Reserve. We dub this novel tool “activist Treasury issuance,” or ATI. By manipulating the amount of interest rate risk owned by investors, ATI works through the same channels as the Fed’s quantitative easing programs. 

Is their accusation reasonable?

Given the significant impact that

Ask economists how they forecast economic activity. It’s likely they will mention productivity, demographics, debt, the Fed, interest rates, and a litany of other elements. Economic confidence is probably not at the top of the list for most economists. It is tricky to gauge as it can be inconsistent. However, confidence can sometimes change quickly and often with significant economic impacts.

Look at the two pictures below. Can you spot a difference between them?

The difference is subtle. The restaurant on the left has 54 diners. While the one on the right is missing the three diners in the front.

What if the three missing diners decided to eat at home that day due to waning confidence in the economy and, ultimately, concerns about the safety of their jobs and investments?

On December 5, 1996, Chairman of the Fed Alan Greenspan offered that stock prices may be too high, thus risking a correction that could result in an economic fallout. He wondered out loud if the market had reached a state of “irrational exuberance.”

Having risen by about 40% since last October, Gold is on a moonshot. Many investment professionals consider gold prices to be a macro barometer, measuring the level of anxiety in the economy, inflation, currency, and geopolitics.

“…the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month.” -Snap CEO Evan Spiegel

We recently read an analogy in which the author compares the current state of asset prices to an airplane flying at 50,000 feet. Unfortunately, we cannot find the article and provide a link. The gist is market valuations are flying at an abnormally high altitude. While our market plane cannot sustain such heights in the long run, there is little reason to suspect it will fall from the sky either.

Taper Is Coming: Got Bonds? The solid economic recovery and easing of COVID restrictions lead us to believe a tapering of QE may not be far off. Further supporting our opinion, inflation has fully recovered to pre-pandemic levels, and employment is improving rapidly.

The Battle Royale: Stocks vs. Bonds. The S&P 500 is at valuations higher than those in 1929 and rival those of 1999. Despite a recession, the index is 25% above where it was trading before the pandemic. The equity stampede is undoubtedly bullish about corporate earnings prospects and, by default, economic growth.