One of the realities we will face is recession. The good news is that we are in the eighth year of a growth phase (the last recession was in 2009) and as you’ll see in my favorite indicator charts below, there are no current signs of recession.
Yield-hungry investors are quickly regaining their taste for deeply subordinated bank bonds. Some of these securities offer appetizing yields, but it’s important not to overindulge.
The Fed finds itself in a tricky place. Next week will likely be rate hike number three. “Three steps and a stumble?” We’ll see. My dad used to always say, “Stuck between a rock and a hard place.” I’ll try my best to explain what I see.
At the beginning of each month I like to take a look at the most recent published equity market valuations. So let’s do that today. As you review the charts, keep in the back of your mind that valuation metrics are pretty much useless in identifying market peaks but they are outstanding at helping us zero in on what the forward 10-year returns are likely to be.
Citing an improving economy and the possibility of more spending and lower taxes from the Trump administration, Fed officials are signaling rising rates immediately ahead.
We sipped the QE juice and loved the taste. Now we’re full… the game has changed. The Fed had assets worth $858 billion on its books in the week ended August 1, 2007 just before the start of the financial crisis, and the same stood at $2.24 trillion at the end of 2009.
Uncertainty about US trade policy changes that could potentially harm emerging market economies dragged them down 4% during the fourth quarter of 2016, underperforming developed markets by 2%.1 Yet emerging market economies generally showed positive signs, with exports beginning to recover, commodity prices rebounding, and inflation remaining benign.
Andrew Ross Sorkin of CNBC and The New York Times wrote an article this week entitled, “A Quiet Giant of Investing Weighs In on Trump.” It’s about the recent investor letter penned by one of the all-time great investors, Seth Klarman. Many hedge fund managers write privately to their clients yet these letters often find a way on to the internet.
Last week I shared a chart with you that’s done a good job at signaling inflation. We tend to react slowly to news and, over time, we wake up. Then we herd in and out. In the “waking up” category, we better keep rising inflation on our radar.
One of the charts I like to keep an eye on looks at inflation and its impact on stock prices. In rising inflationary periods, stocks tend to struggle. When inflation is falling, stocks tend to perform well.