In the most recent FOMC meeting, the committee decided to refrain from raising rates again, but held open the prospect for further hikes this year.
The Bank of Japan met last night to cap off a week of central bank activity.
With government stimulus over, accumulated savings starting to become depleted, rents soaring, and student loans about to switch back on, it appears a credit cycle has begun where borrowers struggle to fulfill their financial commitments.
Today the monthly Job Openings and Labor Turnover survey came out for the month of July. Expectations were for 9.5 million job openings, but the actual figure came in at 8.87 million, representing the biggest miss in recent history.
Today was a disaster for Chinese economic data. In the table below, we can see that every single data point missed consensus expectations in the wrong direction. Activity undershot expectations across the board.
In our Quarterly Strategy Update, we explore the changes that have been occurring in Japan and why we hold a favorable investment stance toward Japanese equities in the Knowledge Leaders Strategies.
Today the minutes of the April 27-28, 2023, Bank of Japan meeting were released. Below in italics are the top ten highlights generated by our AI engine.
Using our AI engine, we prompted a description of the Atlanta Fed’s Flexible CPI. What we got was a pretty decent explanation.
Of course, over 300,000 people getting new jobs is good in itself, particularly for those with newfound opportunities. But, for the last several years, as the “great resignation” took hold, there were not many new workers coming into the workforce, leading to falling unemployment.
Leading into the weekend, when the debt ceiling had not been settled, markets were exhibiting very interesting positioning.
One metric I look at fairly often for various countries is the relationship between the performance of stocks vs. bonds. The idea is straightforward enough: when stocks are outperforming bonds, it tends to be associated with a growing economy.
Credit conditions are tightening in both Europe and the United States. Our analysis follows in our mid-quarter update, Tightening Credit.
It would appear that the decline in European natural gas prices has contributed to an increase in Eurozone GDP estimates for the year. Once prices crossed below $50, GDP estimates began to rise, and now the consensus expects .6% GDP growth from the Eurozone this year.
China reported year-over-year inflation last night at just 0.1%, 0.2% lower than expectations. Clearly, China’s reopening is not creating price pressures, which brings the strength of the reopening into question.
Yesterday JP Morgan introduced a new model to quantify the last 20 years of Federal Reserve statements and speeches. While we aren’t privy to the details of the AI model, we will just assume that the model properly captures dovish and hawkish language.
Lost in the Good Friday holiday and the jobs report was the weekly report on bank lending, deposits and securities holdings. Keeping in mind this data is always a week old, it shows the retreat from banks continues.
As banks back away from credit creation, we think certain assets could reassert their leadership. In our Quarterly Strategy Report, we analyze the Credit Crunch.
We just experienced the fastest bank run in history with the closure of Silicon Valley Bank.
The common narrative is that we’ve (the US) been enjoying a long period of globalization and now that it is going into reverse, it will upend many of the benefits brought by globalization, to the US in particular.
The Atlanta Fed Flexible CPI is a price series developed by the Atlanta Fed to capture the price of items that change the most frequently.
In our Quarterly Strategy Report, we illustrate the relative attractiveness of select developed international sectors.
In a recent San Francisco Federal Reserve Publication titled “Monetary Policy Stance is Tighter Than Fed Funds Rate,” the authors argue that the “all in” policy rate is actually higher than the Fed Funds rate would suggest.
While many seemed to focus on the basics of the employment report like average hourly earnings (which don’t take into consideration industry mix shifts among the employed) and the payroll job beat for the month, there is one very important variable that revealed the weakness in last month’s jobs report.
There are many ways to decompose the bond market to identify the component pieces to infer what the market is pricing in.
We believe highly innovative companies, when accounted for properly, are cheaper than their non-innovative peers in all regions of the world.
The Federal Reserve has been raising rates at an extremely aggressive manner in 2022, taking the federal funds rate from 25bps to 4%.
In recent reports, we’ve been highlighting that innovation—as a factor represented by R&D as % of sales—has stopped underperforming and it is selling for an attractive valuation.
While many perceive the S&P 500 Index to be a broad innovation-heavy index, in a way it is and in a way it isn’t.
A couple of weeks ago, in our quarterly strategy report, I argued that it appeared that innovation had bottomed.
Digging in a little deeper, we sifted through this first quintile of the S&P 500 for other insights.
A couple weeks ago, in our quarterly strategy report (see: QSR-Has Innovation Bottomed?), I argued that it appeared that innovation had bottomed.
Last night, the Reserve Bank of Australia stopped short of another 50bps hike to its overnight cash rate.
It appears to us that global innovation has bottomed and offers attractive value.
Innovation was the market darling thematic for many years leading up to COVID.
Using our proprietary point-and-figure-based charting system, I review a couple thousand charts per week in an attempt to identify interesting buy or sale candidates.
Last week, the combined dollar value of hedge positions on the S&P 500, NASDAQ 100 and Dow Jones Industrial indexes was $121.43 billion, not far from the August 16 peak of $160.02 billion.
The most significant element going into the June low was positioning.
This the name of a recent research piece from the San Francisco Federal Reserve written by Adam Shapiro.
Given all the confusion in the world around COVID, supply chains, inflation dynamics and war, there are lots of potential externalities that could resolve themselves unexpectedly.
Over the weekend, we got a slew of data showing a generally weak economy.
Across US indexes, growth has experienced a resurgence relative to value off the June 17, 2022 low.
Since the COVID low in US Treasury rates and subsequent rise, the Japanese Yen has tracked the yield differential between the US and Japan.
After the June 17, 2022 low, stocks have jumped higher, taking out the 50-day moving average yesterday in the S&P 500. Many are debating whether this is a bear market rally or the reversal of the bruising 6-month decline.
The Smart Money Index was constructed by Don Hays and measures the market action in the first half hour of trading and the last hour of trading.
We think we could see a bullish back half of the year for equity markets. Our analysis follows in our Quarterly Strategy Report.
The President today asked Congress for a gasoline tax holiday to alleviate the cost of gasoline and diesel in the country.
Crude oil and energy equities have been on a tear for the last two years.
We have a very precise methodology for dissecting the world’s equity markets.
As everyone knows, the labor market has been quite strong, with expectations for the unemployment rate to fall further next week.
All year inflation has been the narrative driving markets.
