The last time the Federal Reserve announced its reduction in its bond buying policy to return interest rate policy to the free markets, was a bit messy. We thought it would be interesting to take a look back to the last time this Fed enacted this policy, to see if it will give us clues as to what we can expect when the Fed announces its tapering policy again in the upcoming months. Remembering the 2013 Taper Tantrum Back in 2013, when the market experienced the so-called “Taper Tantrum,” t… View More
June 2021
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Last week the Federal Reserve held its FOMC meeting and came out with an announcement we already knew. Outside the supply chain disruptions being caused by the global economies reopening, our economy is running hot. This announcement was subtle on Wednesday when Fed Chairman Powell made his meeting wrap up commentary but seemed to garner more attention when comments were made on Friday by one FOMC Member that rates would be raised sooner than expected. One fundamental question to ask yourself i… View More
The resiliency of US stocks has been remarkable in recent weeks with rising inflation, weaker than expected employment, fiscal stimulus decelerating, geopolitical tensions rising, and new fiscal policy negotiations in disarray. Still, we could not help but notice the change in sentiment among investors this week following a second disappointing employment report. Investors are grappling with tighter China monetary policy and fading fiscal stimulus. Nearly all of the discussions among investors … View More
As the markets’ muted reaction to higher-than-expected inflation rates has indicated, the Fed appears to have done a great job in convincing investors, and perhaps themselves, that signs of persistently higher inflation will be fleeting, or in the Fed’s current parlance that has the feel of being a potential punchline in economic history, “transitory.” (One can’t help but wonder whether the “WIN” buttons from the 1970s (Whip Inflation Now) may somehow be reincarnated.) To the exten… View More
87.5% of Companies Beat Earnings Estimates in 1Q’21 With 99% of the S&P 500 having reported, it’s fair to say that 1Q’21 was a blowout season for earnings. 87.5% of companies beat their earnings estimates for the quarter, a record high going back to the mid-1990s and well above the long-term historical average of 65%. 2021 EPS Growth Revising Up, 2022 Revising Down The S&P 500’s 2021 estimated EPS growth began the year at 23.3% and, with the help of robust earnings numbers fro… View More
Stimulus-boosted demand is still outpacing supply. The Atlanta Fed’s tracking estimate for U.S. 2Q real GDP is at 9.3% q/q annualized. Consumption should shift from goods to services over the next several quarters (pent-up demand). In the meantime we have inflation. U.S. core PCE inflation was 3.1% y/y in April. Central bankers have labeled price moves as transitory, but this position is likely to be challenged in the near-term given continued bottlenecks. U of Michigan surveys of inflation ex… View More