The Federal Reserve on Wednesday began its policy easing with a bang. Much of the focus was on its decision to cut interest rates by half a percentage point from a two-decade high. But the key question for the bond market is where rates will land once all is said and done. Nobody knows for sure, and Chair Jerome Powell injected enough uncertainty to ensure a choppy ride ahead.
Consumer staples are one of the sleepiest sectors of the US stock market. Investors buy them for their low volatility and generous dividends, not exhilarating upside potential. But lately, toothpaste, bleach and certain big-box food retailers seem to be acting like the new semiconductors.
Earlier this year, the Federal Reserve seemed to have time on its side. Payrolls were growing at a healthy clip and the unemployment rate hovered near a five-decade low. Even though there were signs that inflation was licked, there didn’t appear to be much harm in keeping interest rates elevated for a while longer — just in case.
In some ways, central banking requires a trader’s instincts. Policymakers need to marry academic rigor with quick reflexes. There is a time for rumination and a time for action.
The US stock market has given us plenty of real and perceived calendar anomalies to think about. There’s the observed tendency for stocks to experience a “Santa Claus rally” (during the last five trading days of the year and the first two of the next) and the weekend effect (where stocks have a habit of slumping on Mondays).
Despite what you may have heard from the doomers, the US labor market is hardly falling apart at the seams. Layoffs are still extraordinarily low and a report Friday showed that the overall unemployment rate slipped to just 4.2%.
Since the pandemic, Wall Street strategists have repeatedly underestimated the performance of the US stock market in their annual projections, leading to a mad dash to boost their outlooks in the back end of the year.
Federal Reserve Chair Jerome Powell on Friday removed all doubt that interest rate cuts are just around the corner. “The time has come for policy to adjust,” he said at his much-hyped annual speech in Jackson Hole, Wyoming, setting off a knee-jerk rally in stocks and bonds.
The term “recession” made a big comeback in news stories and social media posts this month. Goldman Sachs Group Inc.’s Chief Economist Jan Hatzius was among those who formally bumped up his odds of a downturn to considerable media hoopla.
If rising layoffs and weakening consumption are going to snowball into a US recession at some point, my interpretation is that the mass of macroeconomic ice crystals is still only about the size of a marble.
Regulators and investors have always had a keen interest in the trades that corporates executives and board members make in their companies’ own shares. The government has to look out for the integrity of financial markets, of course, while investors are eager to ride insiders’ coattails. Unfortunately, it’s never been easy to read the insider tea leaves.
Warren Buffett has been selling a lot of stock, and that revelation is inducing his many admirers to follow suit. His Omaha, Nebraska-based conglomerate, Berkshire Hathaway Inc., reported Saturday that it reduced several positions and slashed its stake in top-holding Apple Inc., a sign to some in markets that the “Oracle of Omaha” was bracing for deep stock-market declines.
In markets and economics, you sometimes have to hold two thoughts in your head simultaneously — an important lesson on a day in which the US unemployment rate unexpectedly surged to its highest in nearly three years.
Economists Stephen Miran and Nouriel Roubini are making waves by suggesting in a paper published last week that the Treasury Department has actively engineered easier financial conditions by increasing the issuance of short-term bills and, consequently, reducing the share of longer-term notes and bonds, thereby keeping yields lower than they would otherwise be.
The mortgage lock-in effect ended in the Levin household shortly before my in-laws arrived from Mexico to celebrate my daughter’s birthday at our home in the Miami area. As usual, my wife and I had no place to put them, and they had to get a room at a Courtyard Marriott.
For the better part of 2024, market commentators have bemoaned the fact that a few mega-capitalization stocks, dubbed the Magnificent Seven, appeared to be carrying the entire US market.
Back in 2021, legions of critics lambasted the Federal Reserve for failing to take proactive and forward-looking steps against the emerging inflation threat. Curiously, many of them have gone silent on the risk that the Fed might get caught flatfooted again, this time by failing to cut interest rates soon enough in the face of weaker inflation and a cooling labor market.
Human nature is such that there are always some folks who put a negative spin on obviously good news.
Thursday’s wildly encouraging consumer price index report shows that the Federal Reserve should be cutting policy rates at its meeting later this month. Unfortunately, they’ll probably keep us waiting until September.
Piper Sandler & Co. is eliminating its price target for the S&P 500 Index. Its Wall Street counterparts should follow suit.
The Federal Reserve will begin a review of its monetary policy framework later this year, including a potential reconsideration of the ways it communicates with the public. Of great interest is the fate of the dot plot, an anonymous collection of policymakers’ interest rate projections that generates considerable attention each quarter on Wall Street.
Wednesday is shaping up to be a doozy in the US bond market. Following the release of the consumer price index at 8:30 a.m. in Washington, investors will turn to the Federal Reserve’s policy rate decision at 2 p.m., which includes an update to policymakers’ carefully scrutinized economic projections.
The labor market data is full of conflicting signals, but the big picture is that the US economy is in pretty good shape. That’s worth celebrating, irrespective of what the “good news is bad news for interest rates” crowd tells you.
In spite of the highest Federal Reserve policy rates in two decades, the US economy grew about 2.5% last year, unemployment remains low and stocks are near all-time highs, leading many observers to conclude that the economy must have become less interest-rate sensitive — and probably needs permanently high benchmark rates to prevent overheating.
Target Corp.’s sales slump last quarter marked the latest example of supposed softening in US consumption, making some stock-market investors jittery that recession could still be in the cards.
Wall Street strategists are worried that US stocks are on a trip to nowhere, but that doesn’t mean you shouldn’t go along for the ride.
In the US stock market, investors have been conditioned to hold onto their winners. The Magnificent Seven were so-named because most of them — both individually and collectively — have delivered consistently extraordinary returns for a decade or so.
At last weekend’s Berkshire Hathaway Inc. annual meeting, one shareholder asked Warren Buffett how his auto insurer Geico might fare in the event that autonomous-driving technology succeeds in slashing the number of accidents, as Tesla Inc.’s Elon Musk suggested it would on an earnings call last month.
Friday’s data showed that the case for disinflation remains intact. Unfortunately, it may take some thick skin to remain an optimist in this environment, as the near-term data continues to complicate the situation and the market embraces a far uglier view of the future.
Markets are supposed to be forward-looking, so it’s a bit of a mystery that bonds sold off as dramatically as they did on evidence that bad first-quarter inflation was worse than previously understood.
Ben Graham, the value investor and Warren Buffett mentor, famously said the market is like a voting machine in the short run, but “in the long run it becomes a weighing machine.”
Fixed-income markets are back in a tizzy over inflation, thanks to the combination of rising risks for energy prices and strong retail sales data — both of which come on the heels of a higher-than-expected consumer price index last week.
Reasonable people can disagree about whether US disinflation is actually stalling and what it might mean for Federal Reserve monetary policy. But it’s getting much harder to deny the underlying strength of the economy, suggesting central bankers can afford to wait before reducing benchmark interest rates.
All durable bull markets need bouts of positivity to keep them moving higher, and the next month is shaping up to be a good-news desert.
The Great Resignation is in the rear-view mirror, and the labor market is showing hints of swinging back in the complete opposite direction.
A curious thing has happened in the US market discourse: In the absence of major concerns about jobs and growth, commentators have started to worry that the economy is too good to keep inflation contained.
With the S&P 500 near all-time highs, insider share sales have picked up at top-performing companies. This quarter alone, Jeff Bezos sold about $9 billion in Amazon.com Inc. stock and Mark Zuckerberg’s net sales of Meta Platforms Inc. amounted to around $850 million.
The Warren Buffett philosophy was never an immutable doctrine frozen in time. In his first shareholder letter after the death of his late, great partner Charlie Munger last November, the Oracle of Omaha reminded investors how important it is to change with the circumstances.
With US valuations ostensibly high compared to global peers, many investors are asking themselves if now is the time to dip their toes into international equities. They’re asking the wrong question.
The latest consumer price index reading indicated that core prices — excluding volatile food and energy — rose 0.4% in January from a month earlier, exceeding the median economist forecast.
Everyone knows you’re not supposed to bet on a bubble, but what about a potential bubble?
Investor worries about market concentration aren’t going away, and it’s easy to understand why: the so-called Magnificent Seven mega-cap growth stocks now constitute about 29% of the S&P 500 Index by market weighting, eliciting ominous comparisons to the peak of the dot-com bubble.
The inflation problem is largely behind us, and most signs suggest that Federal Reserve policymakers know it. So why didn’t they just go ahead and cut rates on Wednesday instead of leaving their target range at 5.25% to 5.5%? Why wait until March or (more likely) May?
Economic growth is barely positive in the Eurozone, and the Chinese stock market has been in freefall. But for all its doubters, the US economy and markets continue to shock the world. For a moment at least, that’s worth celebrating.
The Federal Reserve’s asset purchase program, known as quantitative easing, has twice helped save the US economy — first during the financial crisis and then again with the Covid-19 pandemic.
The Federal Reserve is likely to cut policy rates this year less than the market expects, and the latest inflation report shows why.
Dueling economic reports whiplashed bond markets on Friday — for all the wrong reasons.
Ever since the world was hit by a once-in-a-century pandemic, there’s been a lot of talk about “normalization.”
Federal Reserve Chair Jerome Powell faces a communications conundrum at the central bank’s policy meeting this week. Luckily for him, he could just let the Summary of Economic Projections do most of the talking — and avoid unnecessary misunderstandings.
On Wall Street and in the financial media, many of us make our living by attempting to say “smart stuff” about the Federal Reserve. Unfortunately in some cases, that creates an incentive to make central banking out to be more complicated than it is.
