The Senate Banking Committee held a hearing to investigate the collapse of Signature Bank (SBNY) and Silicon Valley Bank (SIVB/SIVBQ) that brought to discussion possible changes for the entire banking system.
From the perspective of the U.S. stock market, 2022 was a miserable year (with the S&P 500 declining 19.4%), but until recently, 2023 was shaping up to be a stronger year.
The National Association of Realtors® (NAR) released the latest monthly data for its pending home sales index. According to the NAR, "Pending home sales grew in February for the third consecutive month."
With this morning's release of the January S&P Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index saw a 0.4% decrease month-over-month (MoM), higher than the Investing.com forecast of -0.5%, and a 2.6% increase year-over-year (YoY). After adjusting for inflation, the MoM was reduced to -1.1% and the YoY was reduced to -4.8%.
In hindsight, it was obvious it wouldn’t last. Low interest rates — the result of shifts in the global economy, economic stability, low inflation and monetary policy — couldn’t stay at zero forever.
A year into its fight against inflation, the Federal Reserve could — just maybe — be done raising its policy rate. History shows that monetary policy pauses mark great buying opportunities for US stocks, but there are several key caveats to bear in mind this time.
The sudden loss of confidence by depositors in some US banks is causing many to focus on the scope for financial contagion and the needed policy responses. What should not be overlooked is the other, and slower, contagion channel in play — that involving enablers of economic growth...
The Northern Trust Economics team shares its outlook for growth, inflation, employment, and interest rates.
As of March 27, the prices of regular and premium gas were unchanged from last week. According to GasBuddy.com, Hawaii has the highest average price for regular at $4.78 and Mississippi has the cheapest at $2.96. The WTIC end-of-day spot price for crude oil closed at $72.81 and is up 7.4% from last week.
Predicting spot exchanges is tricky, but there are still ways of adding value in currency markets, including through a disciplined approach we call currency factor investing.
The demise of a major bank illustrates the global tensions in the financial sector.
Fifth district manufacturing increased in March, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite manufacturing index is at -5 in March, up 11 from February. This is better than the Investing.com forecast of -10. Despite this month's increase, the latest 3-month moving average dropped by 2 from last month to -10.7, the lowest it has been since June 2020.
Beyond the near-term turmoil, there may need to be a re-evaluation of the regional banking model in the United States, according to a recent panel hosted by Stephen Dover, Head of Franklin Templeton Institute.
The Conference Board released its Consumer Confidence Index ® this morning, with the headline number coming in at 104.2, an increase of 0.8 from the upwardly revised final reading of 103.4 in February. This month's reading is better than the Investing.com forecast of 101.0.
The Federal Reserve’s balance sheet grew by $394B in the past two weeks.
The Federal Housing Finance Agency (FHFA) has released its U.S. house price index (HPI) for January. U.S. house prices increased by 0.2% from the previous month. Year-over-year the index is up 5.3% on a non-seasonally adjusted nominal basis. After adjusting for inflation and seasonality, the real index is down 0.2% in January and down 0.3% year-over-year (seasonally adjusted).
The Federal Reserve raised short-term interest rates by another quarter point on Wednesday.
The Census Bureau has posted its advance report on durable goods new orders for February. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's review durable goods data with those two adjustments.
The economic signals and a host of geopolitical risks confronting investors suggest that 2023 could be as challenging as 20022 for both stocks and bonds.
Should investors build their own portfolios of bonds, or buy shares of bond funds? Is there an economic difference or just one of appearance? Are directly held bonds safer because they mature, and you get your money back? How should one decide?
The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for March. The latest general business activity index came in at -15.7, down 2.2 from last month. The general business activity index has been in contraction territory since May of last year. The 3-month moving average is up 1.5 this month to -12.5, its lowest since June 2022. All figures are seasonally adjusted.
The fallout from SVB will make the Fed's job more difficult.
Review the latest Weekly Headings by CIO Larry Adam.
“QE” or “Quantitative Easing” has been the bull’s “siren song” of the last decade, but will “Not QE” be the same?
Slower credit growth may curtail broader U.S. economic growth, taking pressure off the Federal Reserve.
Recently I saw someone share a clip from their weather app. It said, “Rain expected at 3 pm,” right above a little graphic showing a 30% chance of rain at 3 pm. What’s wrong with that picture?
The U.S. dollar remains the world’s top reserve currency for now, though its share of global central banks’ official holdings has slipped in the past 20 years. By contrast, the yuan’s share of official holdings has more than doubled since 2016.
China’s economy is in the early stages of a gradual, consumer-led recovery. In this issue of Sinology, Andy Rothman outlines why China’s opportunities outweigh risks.
The S&P 500 posted gains for the second straight week after finishing Friday up 0.6%. The index had a mid-week dip but was able to finish up 1.4% from last week. The index is currently up 3.42% YTD and is 17.21% below its record close from January 3, 2022.
Chief Economist Eugenio J. Alemán discusses current economic conditions.
The GMO Focused Equity team has evaluated banks in the context of our Quality Strategy for 20 years, using both quantitative and fundamental analysis to invest in high-quality banks with healthy financials and in our opinion responsible management practices.
Yesterday, the Fed raised its benchmark interest rate 25 basis points to a 4.75%–5.0% range and signaled that one more hike is likely this cycle.
The latest Underlying Inflation Gauge full data set for February is 4.8% while the prices-only measure is 3.9%. Current Headline CPI is now 6.0% and Core CPI is 5.5%.
The Chicago Fed's National Activity Index, which I reported on earlier this week, is based on 85 economic indicators drawn from four broad categories of data. All four categories made negative contributions in February and three of them worsened from January.
To help understand the current market volatility arising from the collapse of banks in the United States and Europe, Head of Franklin Templeton Institute Stephen Dover provides his answers to three crucial questions.
Stocks fell and volatility rose this morning as banking sector worries persist.
Yesterday, the Fed completed its regular meeting and announced that it would increase interest rates by 25 bps, or a quarter percentage point.
Lower interest rates and more liquidity are the keys to boosting confidence in the financial sector, but they impede the Fed's ability to fight inflation.
The latest Kansas City Fed Manufacturing Survey composite index came in at 0, unchanged from last month's figure. The future outlook came in at 3, up 2 from last month.
Financial markets seem to have returned to trying to time a dovish Federal Reserve turn, but Franklin Templeton Fixed Income CIO Sonal Desai says with a tight labor market and inflation running at 5%-6%—don’t bank on it.
This morning's release of the February new home sales from the Census Bureau came in at 640K, up 1.1% month-over-month from a revised 633K in January. This is below the Investing.com forecast of 650K however it is the highest amount of monthly sales in the last 6 months. and above the Investing.com forecast of 620K. The median home price is now at $438,200, up $11.7K from January on a nominal basis.
In a closely watched decision, the Fed lifted its benchmark lending rate by 25 basis points to a range of 4.75% to 5% at the conclusion of its March policy meeting.
The Chicago Fed National Activity Index (CFNAI) fell to -0.19 in February, down from an unrevised +0.23 in January. All four broad categories of indicators used to construct the index made negative contributions in February, and three categories deteriorated from January. The index’s three-month moving average, CFNAI-MA3, moved up to –0.13 in February from –0.27 in January.
The Fed raised short-term rates by another 25 basis points (bp) today and made no changes to the expected peak for short-term rates later this year.
This morning's seasonally adjusted 191K new claims, down 1K from the previous week's revised figure, came in below the Investing.com forecast of 197K.
The Federal Reserve raised interest rates by a quarter percentage point and signaled it’s not finished hiking, despite the risk of exacerbating a bank crisis that’s roiled global markets.
Silicon Valley Bank was a “vital cog” in the private market ecosystem, which leads to many questions—and opportunities—across the alternative investments landscape.
Both the leading indicators of growth and liquidity continue to suggest growth will slow as 2023 progresses.
I am drained having my colleagues and team members come to me with problems because of their frustration with my company.
U.S. stocks climbed for a second straight day Tuesday, with the tech-focused Nasdaq Composite ending near a five-week high, as jitters over bank instability eased.
All eyes in the financial and economic world will be laser-focused Wednesday on the Federal Reserve as Chair Jerome Powell tries to balance his fight against inflation against a sudden banking crisis.
We have been reminding everyone that we believe we are unwinding a financial euphoria episode that Charlie Munger called the biggest of his career, “because of the totality of it.”
Banking turmoil continues to rattle the global markets and investor confidence.
US officials are studying ways they might temporarily expand Federal Deposit Insurance Corp. coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.
CIO Larry Adam outlines the positive events that are outweighing negative developments and looks at dynamics to focus on in the week ahead.
This morning's release of the February existing home sales showed that sales surged to a seasonally adjusted annual rate of 4.58 million units from the previous month's 4.00 million, ending the 12-month streak of monthly declines. The latest number represents a 14.5% month-over-month increase, its largest since July 2020 and well above the Investing.com forecast of 5%. With that being said, existing home sales are down 22.6% compared to one year ago.
The simplest thing that can be said about current financial market and banking conditions is this: the unwinding of this Fed-induced, yield-seeking speculative bubble is proceeding as one would expect, and it’s not over by a longshot.
FINRA has released new data for margin debt, now available through February. The latest debt level is at 624.38 billion, down 2.6% month-over-month (MoM) and down 25.3% year-over-year (YoY). However after adjusting for inflation, debt level is down 3.2% MoM and down 29.5% YoY.
Steve Chiavarone doesn’t want to scare anyone, but what he remembers most from the last banking crisis was how sure most people were that it wouldn’t happen.
Markets have been trading as if the end of the world is at hand – but what most participants see, behind the recent financial turmoil and contagion fears, is a still-strong US economy, the MLIV Pulse survey shows.
Portfolio Manager Andy Acker explains why the healthcare sector could offer an attractive combination of defense and growth in today’s market.
The late great Supreme Court Justice Antonin Scalia was often in dissent in key legal cases during his long career.
Robust risk management is essential for fixed income investors. In his latest commentary, Marcus Moore explains why our sustainable investing team considers ESG factors as material business risks, similar to the traditional risks they also analyze.
Central banks endlessly fascinate me.
Franklin Templeton Investment Solutions explores the shared macro concerns that set the stage for the recent banking crisis, its ripple effects on the broader economy and implications for multi-asset investing.
A TIPS is risky in the short term and riskless in the long run, which is precisely the opposite of, and complementary to, a T-bill, which is riskless in the short term but, because of reinvestment rate volatility, risky in the long run.
With the collapse of Silicon Valley Bank, questions of potential “bank runs” spread among regional banks.
Could the consensus view of a “no recession” scenario be wrong? As portfolio managers, this is the question we ask ourselves daily.
For years I’ve used a sandpile metaphor to describe complex systems like banking. Keep dropping grains of sand long enough and you will eventually trigger an avalanche.
Sixty-six million Americans currently receive monthly benefits from Social Security, which, if nothing changes, is expected to be insolvent by 2035 at the latest. It’s time for Americans to take a greater role in their own retirement planning.
The full story of SVB is still unfolding, but we offer some initial reactions.
My “five-step investment process” provides an ongoing systematic framework for making portfolio decisions, and further incorporating financial planning and tax considerations into overall portfolio construction.
The yield on the 10-year note ended March 17, 2023 at 3.39%, the two-year note ended at 3.81%, and the 30-year at 3.60%.
GMO 7-year Asset Class Forecast: February 2023
I've updated this series to include the February release of the consumer price index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $48,172, down 8.2% from 50 years ago. Hourly earnings are below their all-time high after adjusting for inflation.
This morning's report revealed industrial production numbers were unchanged in February despite expectations that industrial production would inch up 0.2%. The annual change dropped below zero for the first time in two years to -0.25%, down from last month's year-over-year increase of 0.49%. The annual change was well below the forecast of 3.0%.
The key to if — or when — the US economy falls into recession will depend on how the latest turmoil in the banking sector spills over to Main Street.
U.S. equities are lower as pressure has returned to the banking sector, which remains top of mind.
Following this week’s banking crisis and the return of government bailouts, investors and traders alike are once again calling for a Fed pivot.
The market gyrations are not rooted in a banking crisis, but in financial cracks from rapid rate hikes.
The latest Conference Board Leading Economic Index (LEI) for February was down 0.3% to 110.0 from January's final figure of 110.3, marking the 11th consecutive MoM decline. Today's reading was consistent with the Investing.com forecast.
The March preliminary report for the Michigan Consumer Sentiment Index came in at 63.4, down 3.6 (-5.4%) from the February final. This morning's reading was the first monthly decline in the last four months and came in below the Investing.com forecast of 66.9. Since its beginning in 1978, consumer sentiment is 25.7% below its average reading (arithmetic mean) and 24.7% below its geometric mean.
Portfolio manager Peeyush Mittal and research analyst Swagato Ghosh say India has a fiscal playbook to chart a path of stability and growth.
In a dovish move, the central bank raises rates by half a point.
Implications of SVB and Credit Suisse on the European banking sector—check out highlights from our recent panel discussion with Kim Catechis, Investment Strategist with the Franklin Templeton Institute.
Month-over-month nominal retail sales in January were down 0.4% and up 5.4% YoY. However after adjusting for inflation, real retail sales decreased by 0.8% and were down 0.6% YoY.
February's ZHVI came in at $327,514, practically unchanged from January and up 6.76% from February 2022. After adjusting for inflation, the real figures are -0.71% month-over-month and -1.16% year-over-year.
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
The latest manufacturing index came in at -23.2, up 1.1 from last month's -24.3, marking the index's seventh negative reading in a row.. The three-month moving average is now at -18.8, down from last month and the lowest since June 2020. The six-month outlook was down 9.7 points to -8.0. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion.
Economic Insights
Proposed Bank Changes and Fed Comments
The Senate Banking Committee held a hearing to investigate the collapse of Signature Bank (SBNY) and Silicon Valley Bank (SIVB/SIVBQ) that brought to discussion possible changes for the entire banking system.
From Crisis Comes Opportunity
From the perspective of the U.S. stock market, 2022 was a miserable year (with the S&P 500 declining 19.4%), but until recently, 2023 was shaping up to be a stronger year.
Pending Home Sales Grew for Third Consecutive Month, Up 0.8% in February
The National Association of Realtors® (NAR) released the latest monthly data for its pending home sales index. According to the NAR, "Pending home sales grew in February for the third consecutive month."
S&P Case-Shiller Home Price Index Continued Decline in January
With this morning's release of the January S&P Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index saw a 0.4% decrease month-over-month (MoM), higher than the Investing.com forecast of -0.5%, and a 2.6% increase year-over-year (YoY). After adjusting for inflation, the MoM was reduced to -1.1% and the YoY was reduced to -4.8%.
Biden Has to Learn the Same Lesson as SVB
In hindsight, it was obvious it wouldn’t last. Low interest rates — the result of shifts in the global economy, economic stability, low inflation and monetary policy — couldn’t stay at zero forever.
History Says to Buy the Fed Pause. Should You?
A year into its fight against inflation, the Federal Reserve could — just maybe — be done raising its policy rate. History shows that monetary policy pauses mark great buying opportunities for US stocks, but there are several key caveats to bear in mind this time.
What Happens in the Banking Sector Won’t Stay There
The sudden loss of confidence by depositors in some US banks is causing many to focus on the scope for financial contagion and the needed policy responses. What should not be overlooked is the other, and slower, contagion channel in play — that involving enablers of economic growth...
Banking Stresses the Outlook
The Northern Trust Economics team shares its outlook for growth, inflation, employment, and interest rates.
Weekly Gasoline Prices: Regular and Premium Remain Steady
As of March 27, the prices of regular and premium gas were unchanged from last week. According to GasBuddy.com, Hawaii has the highest average price for regular at $4.78 and Mississippi has the cheapest at $2.96. The WTIC end-of-day spot price for crude oil closed at $72.81 and is up 7.4% from last week.
Confessions of a Currency Manager
Predicting spot exchanges is tricky, but there are still ways of adding value in currency markets, including through a disciplined approach we call currency factor investing.
The Consequences of Credit Suisse
The demise of a major bank illustrates the global tensions in the financial sector.
Richmond Fed Manufacturing Activity Improved Modestly in March
Fifth district manufacturing increased in March, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite manufacturing index is at -5 in March, up 11 from February. This is better than the Investing.com forecast of -10. Despite this month's increase, the latest 3-month moving average dropped by 2 from last month to -10.7, the lowest it has been since June 2020.
From A Deep Dive Into The Banking Sector
Beyond the near-term turmoil, there may need to be a re-evaluation of the regional banking model in the United States, according to a recent panel hosted by Stephen Dover, Head of Franklin Templeton Institute.
Consumer Confidence Increased Slightly in March
The Conference Board released its Consumer Confidence Index ® this morning, with the headline number coming in at 104.2, an increase of 0.8 from the upwardly revised final reading of 103.4 in February. This month's reading is better than the Investing.com forecast of 101.0.
The Case for Gold is Looking Stronger
The Federal Reserve’s balance sheet grew by $394B in the past two weeks.
FHFA House Price Index Up 0.2% in January, Beats Forecast
The Federal Housing Finance Agency (FHFA) has released its U.S. house price index (HPI) for January. U.S. house prices increased by 0.2% from the previous month. Year-over-year the index is up 5.3% on a non-seasonally adjusted nominal basis. After adjusting for inflation and seasonality, the real index is down 0.2% in January and down 0.3% year-over-year (seasonally adjusted).
The Fed Waffles
The Federal Reserve raised short-term interest rates by another quarter point on Wednesday.
The "Real" Goods on the February Durable Goods Data
The Census Bureau has posted its advance report on durable goods new orders for February. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's review durable goods data with those two adjustments.
First Quarter 2023 Economic Review and Forecast
The economic signals and a host of geopolitical risks confronting investors suggest that 2023 could be as challenging as 20022 for both stocks and bonds.
The Dilemma That Isn’t: Bonds versus Bond Funds
Should investors build their own portfolios of bonds, or buy shares of bond funds? Is there an economic difference or just one of appearance? Are directly held bonds safer because they mature, and you get your money back? How should one decide?
Dallas Fed Manufacturing: Business Conditions Continued to Worsen in March
The Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for March. The latest general business activity index came in at -15.7, down 2.2 from last month. The general business activity index has been in contraction territory since May of last year. The 3-month moving average is up 1.5 this month to -12.5, its lowest since June 2022. All figures are seasonally adjusted.
The Fed Faces Its Trilemma
The fallout from SVB will make the Fed's job more difficult.
Market and Economic Dynamics to Keep an Eye On
Review the latest Weekly Headings by CIO Larry Adam.
“Not QE” Puts Fed Between A “Rock And A Hard Place”
“QE” or “Quantitative Easing” has been the bull’s “siren song” of the last decade, but will “Not QE” be the same?
Fed Weighs Stubborn Inflation Against Banking System Stress
Slower credit growth may curtail broader U.S. economic growth, taking pressure off the Federal Reserve.
Recession Odds Rising
Recently I saw someone share a clip from their weather app. It said, “Rain expected at 3 pm,” right above a little graphic showing a 30% chance of rain at 3 pm. What’s wrong with that picture?
Is This The End Of The Petrodollar?
The U.S. dollar remains the world’s top reserve currency for now, though its share of global central banks’ official holdings has slipped in the past 20 years. By contrast, the yuan’s share of official holdings has more than doubled since 2016.
Sinology: Opportunity and Risk
China’s economy is in the early stages of a gradual, consumer-led recovery. In this issue of Sinology, Andy Rothman outlines why China’s opportunities outweigh risks.
S&P 500 Snapshot: Gains Posted for Second Straight Week
The S&P 500 posted gains for the second straight week after finishing Friday up 0.6%. The index had a mid-week dip but was able to finish up 1.4% from last week. The index is currently up 3.42% YTD and is 17.21% below its record close from January 3, 2022.
Growth in Real Money Supply is What is Important for Taming Inflation, and for the Fed
Chief Economist Eugenio J. Alemán discusses current economic conditions.
Echoes Of '08? Don't Bank On It
The GMO Focused Equity team has evaluated banks in the context of our Quality Strategy for 20 years, using both quantitative and fundamental analysis to invest in high-quality banks with healthy financials and in our opinion responsible management practices.
With Banks in Focus, the Fed Signals (Cautious) Optimism
Yesterday, the Fed raised its benchmark interest rate 25 basis points to a 4.75%–5.0% range and signaled that one more hike is likely this cycle.
Underlying Inflation Gauge: February Update
The latest Underlying Inflation Gauge full data set for February is 4.8% while the prices-only measure is 3.9%. Current Headline CPI is now 6.0% and Core CPI is 5.5%.
CFNAI Components: February Update
The Chicago Fed's National Activity Index, which I reported on earlier this week, is based on 85 economic indicators drawn from four broad categories of data. All four categories made negative contributions in February and three of them worsened from January.
The Crucial Questions
To help understand the current market volatility arising from the collapse of banks in the United States and Europe, Head of Franklin Templeton Institute Stephen Dover provides his answers to three crucial questions.
Markets Again Under Pressure
Stocks fell and volatility rose this morning as banking sector worries persist.
Market Focus Moves from the Fed to Financial Crisis
Yesterday, the Fed completed its regular meeting and announced that it would increase interest rates by 25 bps, or a quarter percentage point.
Phase Two of the Fed Follies
Lower interest rates and more liquidity are the keys to boosting confidence in the financial sector, but they impede the Fed's ability to fight inflation.
Kansas City Fed Manufacturing Survey: Activity Stayed Flat
The latest Kansas City Fed Manufacturing Survey composite index came in at 0, unchanged from last month's figure. The future outlook came in at 3, up 2 from last month.
Don’t Bank On It
Financial markets seem to have returned to trying to time a dovish Federal Reserve turn, but Franklin Templeton Fixed Income CIO Sonal Desai says with a tight labor market and inflation running at 5%-6%—don’t bank on it.
New Home Sales Up for Third Straight Month
This morning's release of the February new home sales from the Census Bureau came in at 640K, up 1.1% month-over-month from a revised 633K in January. This is below the Investing.com forecast of 650K however it is the highest amount of monthly sales in the last 6 months. and above the Investing.com forecast of 620K. The median home price is now at $438,200, up $11.7K from January on a nominal basis.
March Fed Rate Hike: Sometimes the Moments That Challenge Us the Most Define Us
In a closely watched decision, the Fed lifted its benchmark lending rate by 25 basis points to a range of 4.75% to 5% at the conclusion of its March policy meeting.
Chicago Fed: Economic Growth Declined in February
The Chicago Fed National Activity Index (CFNAI) fell to -0.19 in February, down from an unrevised +0.23 in January. All four broad categories of indicators used to construct the index made negative contributions in February, and three categories deteriorated from January. The index’s three-month moving average, CFNAI-MA3, moved up to –0.13 in February from –0.27 in January.
Research Reports
The Fed raised short-term rates by another 25 basis points (bp) today and made no changes to the expected peak for short-term rates later this year.
Weekly Unemployment Claims: Down 1K, Lower Than Expected
This morning's seasonally adjusted 191K new claims, down 1K from the previous week's revised figure, came in below the Investing.com forecast of 197K.
Fed Hikes Quarter Point, Signals It Still Expects Higher Rates
The Federal Reserve raised interest rates by a quarter percentage point and signaled it’s not finished hiking, despite the risk of exacerbating a bank crisis that’s roiled global markets.
Alternative Investments Outlook Post-SVB
Silicon Valley Bank was a “vital cog” in the private market ecosystem, which leads to many questions—and opportunities—across the alternative investments landscape.
The Growth Slowdown Is Not Over Yet
Both the leading indicators of growth and liquidity continue to suggest growth will slow as 2023 progresses.
Is My Company Really That Bad?
I am drained having my colleagues and team members come to me with problems because of their frustration with my company.
Stocks Climb Ahead of Fed Meeting
U.S. stocks climbed for a second straight day Tuesday, with the tech-focused Nasdaq Composite ending near a five-week high, as jitters over bank instability eased.
Fed Caught Between Inflation and Bank Crisis
All eyes in the financial and economic world will be laser-focused Wednesday on the Federal Reserve as Chair Jerome Powell tries to balance his fight against inflation against a sudden banking crisis.
Funding Unprofitable Growth
We have been reminding everyone that we believe we are unwinding a financial euphoria episode that Charlie Munger called the biggest of his career, “because of the totality of it.”
Banking, Inflation, and the Fed: Where Do We Go From Here?
Banking turmoil continues to rattle the global markets and investor confidence.
US Studies Ways to Insure All Bank Deposits If Crisis Grows
US officials are studying ways they might temporarily expand Federal Deposit Insurance Corp. coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.
Incremental Progress Emerging in the Banking Sector Fallout
CIO Larry Adam outlines the positive events that are outweighing negative developments and looks at dynamics to focus on in the week ahead.
Existing-Home Sales Surge in February, Ending 12-Month Streak of Declines
This morning's release of the February existing home sales showed that sales surged to a seasonally adjusted annual rate of 4.58 million units from the previous month's 4.00 million, ending the 12-month streak of monthly declines. The latest number represents a 14.5% month-over-month increase, its largest since July 2020 and well above the Investing.com forecast of 5%. With that being said, existing home sales are down 22.6% compared to one year ago.
Edge of the Edge
The simplest thing that can be said about current financial market and banking conditions is this: the unwinding of this Fed-induced, yield-seeking speculative bubble is proceeding as one would expect, and it’s not over by a longshot.
Margin Debt Down 2.6% in February
FINRA has released new data for margin debt, now available through February. The latest debt level is at 624.38 billion, down 2.6% month-over-month (MoM) and down 25.3% year-over-year (YoY). However after adjusting for inflation, debt level is down 3.2% MoM and down 29.5% YoY.
A Difficult Job Becomes Even More Difficult
Chief Economist Eugenio J. Alemán discusses current economic conditions.
Bank Crisis Survivors Remember How Fast the Dominoes Can Fall
Steve Chiavarone doesn’t want to scare anyone, but what he remembers most from the last banking crisis was how sure most people were that it wouldn’t happen.
US Economy Has Investor Backing as Bank Risks Grow
Markets have been trading as if the end of the world is at hand – but what most participants see, behind the recent financial turmoil and contagion fears, is a still-strong US economy, the MLIV Pulse survey shows.
Two Sides of Healthcare, One Strong Investment Case
Portfolio Manager Andy Acker explains why the healthcare sector could offer an attractive combination of defense and growth in today’s market.
Heading Toward a National Bank?
The late great Supreme Court Justice Antonin Scalia was often in dissent in key legal cases during his long career.
Sustainable Investing: Opportunistically Managing Risk
Robust risk management is essential for fixed income investors. In his latest commentary, Marcus Moore explains why our sustainable investing team considers ESG factors as material business risks, similar to the traditional risks they also analyze.
The Fed’s Got Inflation Backwards
Central banks endlessly fascinate me.
A Multi-Asset Perspective on Recent Bank Turmoil: Don’t Lose Sight of the Macro Story
Franklin Templeton Investment Solutions explores the shared macro concerns that set the stage for the recent banking crisis, its ripple effects on the broader economy and implications for multi-asset investing.
Riskless at Age 104
A TIPS is risky in the short term and riskless in the long run, which is precisely the opposite of, and complementary to, a T-bill, which is riskless in the short term but, because of reinvestment rate volatility, risky in the long run.
Bank Runs. The First Sign The Fed “Broke Something.”
With the collapse of Silicon Valley Bank, questions of potential “bank runs” spread among regional banks.
Consensus View Of “No Recession.” Could It Be Wrong?
Could the consensus view of a “no recession” scenario be wrong? As portfolio managers, this is the question we ask ourselves daily.
Another Unstable Finger
For years I’ve used a sandpile metaphor to describe complex systems like banking. Keep dropping grains of sand long enough and you will eventually trigger an avalanche.
Pension Reform Showdown: Will The U.S. Follow France’s Bold Retirement Age Changes?
Sixty-six million Americans currently receive monthly benefits from Social Security, which, if nothing changes, is expected to be insolvent by 2035 at the latest. It’s time for Americans to take a greater role in their own retirement planning.
Silicon Valley: The Consequences of a Bank's Failure
The full story of SVB is still unfolding, but we offer some initial reactions.
The Professor's Portfolio
My “five-step investment process” provides an ongoing systematic framework for making portfolio decisions, and further incorporating financial planning and tax considerations into overall portfolio construction.
Treasury Yields Snapshot: March 17, 2023
The yield on the 10-year note ended March 17, 2023 at 3.39%, the two-year note ended at 3.81%, and the 30-year at 3.60%.
GMO 7-year Asset Class Forecast: February 2023
GMO 7-year Asset Class Forecast: February 2023
Middle-Class Hourly Wages as of February 2023
I've updated this series to include the February release of the consumer price index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $48,172, down 8.2% from 50 years ago. Hourly earnings are below their all-time high after adjusting for inflation.
The Big Four: Industrial Production Unchanged in February
This morning's report revealed industrial production numbers were unchanged in February despite expectations that industrial production would inch up 0.2%. The annual change dropped below zero for the first time in two years to -0.25%, down from last month's year-over-year increase of 0.49%. The annual change was well below the forecast of 3.0%.
Where to Look for Signs Financial Turmoil Is Impacting the US Economy
The key to if — or when — the US economy falls into recession will depend on how the latest turmoil in the banking sector spills over to Main Street.
Banking Sector Uncertainty Keeps Pressure on Stocks
U.S. equities are lower as pressure has returned to the banking sector, which remains top of mind.
Don’t Expect a Fed Pivot Just Yet
Following this week’s banking crisis and the return of government bailouts, investors and traders alike are once again calling for a Fed pivot.
No 2008 Redux, But Recession Coming
The market gyrations are not rooted in a banking crisis, but in financial cracks from rapid rate hikes.
CB LEI: Down 0.3% in February, Still Pointing to Risk of Recession
The latest Conference Board Leading Economic Index (LEI) for February was down 0.3% to 110.0 from January's final figure of 110.3, marking the 11th consecutive MoM decline. Today's reading was consistent with the Investing.com forecast.
Michigan Consumer Sentiment Drops for First Time in Four Months
The March preliminary report for the Michigan Consumer Sentiment Index came in at 63.4, down 3.6 (-5.4%) from the February final. This morning's reading was the first monthly decline in the last four months and came in below the Investing.com forecast of 66.9. Since its beginning in 1978, consumer sentiment is 25.7% below its average reading (arithmetic mean) and 24.7% below its geometric mean.
India’s Balancing Act
Portfolio manager Peeyush Mittal and research analyst Swagato Ghosh say India has a fiscal playbook to chart a path of stability and growth.
The ECB Hikes Rates Amid Financial Market Volatility
In a dovish move, the central bank raises rates by half a point.
European Banking Sector—Taking Stock After Silicon Valley Bank and Credit Suisse
Implications of SVB and Credit Suisse on the European banking sector—check out highlights from our recent panel discussion with Kim Catechis, Investment Strategist with the Franklin Templeton Institute.
The Big Four: February Real Retail Sales Down 0.8%
Month-over-month nominal retail sales in January were down 0.4% and up 5.4% YoY. However after adjusting for inflation, real retail sales decreased by 0.8% and were down 0.6% YoY.
Zillow Home Value Index: February Update
February's ZHVI came in at $327,514, practically unchanged from January and up 6.76% from February 2022. After adjusting for inflation, the real figures are -0.71% month-over-month and -1.16% year-over-year.
Inside the Consumer Price Index: February 2023
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
Philly Fed Manufacturing Index: Activity Declines for Seventh Straight Month
The latest manufacturing index came in at -23.2, up 1.1 from last month's -24.3, marking the index's seventh negative reading in a row.. The three-month moving average is now at -18.8, down from last month and the lowest since June 2020. The six-month outlook was down 9.7 points to -8.0. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion.