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Mar 09

Renewed Fed Hawkishness Raises Recession Risk

As much as Fed Chair Jerome Powell may claim that the Fed is not trying to push the economy into recession, it is becoming increasingly likely that their fight against inflation will produce that exact result. Following a series of stronger than expected economic data prints over the last couple... read more →
Mar 02
Mar 01

Final Observations from 4Q Earnings Season

With 475 companies (96% of market capitalization) of the S&P 500 index having reported 4Q 2022 results, the earnings season is officially drawing to a close. As expected, 4Q 2022 was the first quarter to record negative year-over-year earnings growth since 3Q 2020, with earnings declining by 4.9% compared to... read more →
Feb 24

It’s been a long three years…

Three years ago, this week, the world was hit by the onset of the COVID pandemic.  Levels of serious illness started to spike and global markets recoiled accordingly.  That truly seems like a million years ago.  One year ago, the war in Ukraine started.  Neither of these are happy anniversaries,... read more →
Feb 22

Inflation remains a monetary phenomenon

Supply and demand drives inflation, including the supply and demand of money itself.  Why did inflation spike in early 2022?  Because we had record money supply growth in BOTH 2020 and 2021 combined with a Fed unwilling/late to act with regards to rate hikes.  The M2 chart below captures the... read more →
Feb 16

Still no stress in corporate bonds

With fears of oncoming recession still swirling, the corporate bond market continues to mostly mimic a big shoulder-shrug about that very prospect. As we’ve noted, the difference in yield between corporate bonds and comparable risk-free Treasuries (i.e., the credit spread) is one of the go-to places to look for signs... read more →
Feb 15

Inflation: Cooling quickly but still elevated

Yesterday’s CPI inflation data notes an economy that still has elevated inflation, but the trajectory of inflation is cooling and cooling very quickly. Core CPI excluding shelter costs was up just +.17% MoM. On a year-over-year basis, Core CPI ex shelter was up +3.9%. A year ago, CPI ex shelter... read more →
Feb 07

Everything has a season…including the credit markets

We talk often/always/incessantly about “cycles”.  Market cycles are driven by the broad availability and cost of money. Market cycles are driven by economic growth and contraction. They are driven by innovation, investment, corporate earnings, employment, and credit availability. Market cycles are like the ocean tide: they go both in and out,... read more →
Feb 03

2023: Technicals over narrative

Recession, earnings, the Fed, ongoing war, housing concerns, debt ceiling, over-valuation…. The gloom can crush you. Don’t listen to it. Look at the data: S&P 500 price is above the 50-day moving average and above the 200-day moving average S&P 500 50-day moving average above the 200-day moving average (golden... read more →
Feb 02

The Recession of 2023

We continue to believe that the likelihood of a recession in 2023 is someplace between absolutely certain and virtually guaranteed. Our recession model has been signaling that for a while now as economic demand continues to erode due to tighter financial conditions. Tighter financial conditions (the combination of higher Fed... read more →