Tag Archive: credit spreads

Bi-Weekly Economic Review: Growth Expectations Break Out?

2018-05-22

by

2018-05-22

Economic Growth & Investment
There are a lot of reasons why interest rates may have risen recently. The federal government is expected to post a larger deficit this year – and in future years – due to the tax cuts. Further exacerbating those concerns is the ongoing shrinkage of the Fed’s balance sheet. Increased supply and potentially decreased demand is not a recipe for higher prices. In addition, there is some fear that the ongoing trade disputes may impact foreign demand...

Read More »

Global Asset Allocation Update

2018-05-17

by

2018-05-17

Moderate Allocation
The risk budget changes this month as I add back the 5% cash raised in late October. For the moderate risk investor, the allocation to bonds is still 50% while the risk side now rises to 50% as well. I raised the cash back in late October due to the extreme overbought nature of the stock market and frankly it was a mistake. Stocks went from overbought to more overbought and I missed the rally to all time highs in January.

Read More »

Bi-Weekly Economic Review: Oil, Interest Rates & Economic Growth

2018-05-09

by

2018-05-09

Economic Growth and Investment
The yield on the 10 year Treasury note briefly surpassed the supposedly important 3% barrier and then….nothing. So, maybe, contrary to all the commentary that placed such importance on that level, it was just another line on a chart and the bond bear market fear mongering told us a lot about the commentators and not a lot about the market or the economy.

Read More »

Bi-Weekly Economic Review: Interest Rates Make Their Move

2018-04-27

by

2018-04-27

Economic Growth and Investment
How quickly things change in these markets. In the report two weeks ago, the markets reflected a pretty obvious slowing in the global economy. In the course of two weeks, what seemed obvious has been quickly reversed. The 10-year yield moved up a quick 20 basis points in just a week, a rise in nominal growth expectations that was mostly about inflation fears.

Read More »

Bi-Weekly Economic Review: Investing Is Not A Game of Perfect

2018-04-11

by

2018-04-11

Economic Growth and Investment
The market volatility this year has been blamed on a lot of factors. The initial selloff was blamed on a hotter than expected wage number in the January employment report that supposedly sparked concerns about inflation – although a similar number this month wasn’t mentioned as a cause of last Friday’s selling. The unwinding of the short volatility trade exacerbated the situation and voila, 12% came off the market in a matter of days.

Read More »

Bi-Weekly Economic Review: Embrace The Uncertainty

2018-03-28

by

2018-03-28

There’s something happening here What it is ain’t exactly clear There’s a man with a gun over there Telling me I got to beware I think it’s time we stop, children, what’s that sound Everybody look what’s going down There’s battle lines being drawn Nobody’s right if everybody’s wrong Young people speaking their minds Getting so much resistance from behind It’s time we stop, hey, what’s that sound Everybody look what’s going...

Read More »

Bi-Weekly Economic Review: The New Normal Continues

2018-03-14

by

2018-03-14

There has been a lot of talk about the economic impact of the recent tax reform. All of it, including the analyses that include lots of fancy math, amounts to nothing more than speculation, usually informed by little more than the political bias of the analyst. I am guilty of that too to some degree but I don’t let my personal political views dictate how I view the economy for purposes of investing.

Read More »

Global Asset Allocation Update: Tariffs Don’t Warrant A Change…Yet

2018-03-12

by

2018-03-12

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. We have had continued volatility since the last update but the market action so far is pretty mundane. The initial selloff halted at the 200 day moving average and the rebound carried to just over the 50 day moving average.

Read More »

Bi-Weekly Economic Review: One Down, Three To Go

2018-03-01

by

2018-03-01

US Leading Index, 1984 - 2018
We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details. Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable.

Read More »

Bi-Weekly Economic Review

2018-02-14

by

2018-02-14

Personal income for December was better than expected at up 0.4% on the month and 4.11% year over year. Wages and salaries were up 0.5%. Unfortunately, that rate of rise is not even up to the lower end of the range we’ve seen in past expansions when 5% income growth was a precursor to recession. Still, it is, sadly, about average for this expansion.

Read More »

Global Asset Allocation Update:

2018-02-09

by

2018-02-09

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. Despite the selloff of the last week I don’t believe any portfolio action is warranted. While the overbought condition has largely been corrected now, the S&P 500 is far from the opposite condition, oversold. At the lows this morning, the S&P 500 was officially in correction territory, down 10% from the...

Read More »

Bi-Weekly Economic Review: Markets At Extremes

2018-01-30

by

2018-01-30

Production ended the year on a strong note but early readings from January are not as positive. The December industrial production report headline was strong at a 0.9% gain but a lot of that strength was in the mining (oil drilling) and utility sectors. Mining has actually led the way the last year as rig count has risen with drilling activity. I’d love to see our economy less dependent on the price of oil but that is what we’ve become over the...

Read More »

Bi-Weekly Economic Review: A Weak Dollar Stirs A Toxic Stew

2018-01-16

by

2018-01-16

We received several employment related reports in the first two weeks of the year. The rate of growth in employment has been slowing for some time – slowly – and these reports continue that trend. The JOLTS report showed a drop in job openings, hires and quits.

Read More »

Global Asset Allocation Update

2018-01-05

by

2018-01-05

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market persists so I will continue to hold a modest amount of cash. There are some minor changes within the portfolios but the overall allocation is unchanged.

Read More »

Bi-Weekly Economic Review: Housing Market Accelerates

2018-01-03

by

2018-01-03

The economy ended 2017 with current growth just slightly above trend. In general the reports of the last two weeks of the year were pretty good with housing a standout performer going into the new year. We are still trying to get past the impact – positive and negative – from the hurricanes a few months ago though so it is probably prudent to wait for more evidence before making any definitive pronouncements about the economy.

Read More »

Bi-Weekly Economic Review: Animal Spirits Haunt The Market

2017-12-20

by

2017-12-20

The economic data over the last two weeks continued the better than expected trend. Some of the data was quite good and makes one wonder if maybe, just maybe, we are finally ready to break out of the economic doldrums. Is it possible that all that new normal, secular stagnation stuff was just a lack of animal spirits?

Read More »

Bi-Weekly Economic Review: Who You Gonna Believe?

2017-12-07

by

2017-12-07

We’ve had a pretty good run of data recently and with the tax bill passing the Senate one would expect to see markets react positively, to reflect renewed optimism about economic growth. We have improving economic data on pretty much a global basis. It isn’t a boom by any stretch of the imagination but there is no doubt that the rate of change has recently been more positive.

Read More »

Global Asset Allocation Update

2017-12-02

by

2017-12-02

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market did not correct since the last update and so I will continue to hold a modest amount of cash.

Read More »

Bi-Weekly Economic Review: A Whirlwind of Data

2017-11-22

by

2017-11-22

The economic data of the last two weeks was generally better than expected, the Citigroup Economic Surprise index near the highs of the year. Still, as I’ve warned repeatedly over the last few years, better than expected should not be confused with good. We go through mini-cycles all the time, the economy ebbing and flowing through the course of a business cycle.

Read More »

Bi-Weekly Economic Review: Gridlock & The Status Quo

2017-11-08

by

2017-11-08

The good news is that the economy just printed its second consecutive quarter of 3% growth, a feat not accomplished since Q2 and Q3 2014. The bad news is that the growth spurt in 2014 was better, quantitatively and qualitatively. Those two quarters produced gains of 4.6% and 5.2% (annualized) in GDP, much better than the most recent 3.1% and 3% prints of Q2 and Q3 2017.

Read More »