Stock Markets and the Economy
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Inflation, Rising Rates, Falling Stocks and More, Oh My!
A lot has happened in the economy and markets since last December, and so there’s much to cover in the semi-annual economic and investment review that I am offering in the latest edition of the Retirement Watch Spotlight Series. In last December’s semi-annual review, I stated that the Federal Reserve was in its end game […]
The Fed, China and More Upset the Markets
The global economy and investment markets are being roiled by policy actions in the three largest economies. Japan is the third-largest economy and the largest nondomestic holder of U.S. Treasury bonds, when both private and public sector holdings are considered, owning $1.3 trillion in treasuries. The Bank of Japan continues to try to stimulate its […]
The Tradeoff: Inflation vs. Growth
The Federal Reserve now must choose between infla- tion and eco- nomic growth, and indications are it will sacrifice growth to reduce inflation. Since the financial crisis, the Fed hasn’t had to make this choice. Long- term factors contained inflation. There was little risk monetary stimulus would trigger an inflationary spiral. Things are different now. […]
The Risk of Stagflation Increases
Are we about to face another period of stagflation like the one in the 1970s? Before Russia invaded Ukraine, the economy already was facing a series of supply and demand shocks that pushed inflation to its highest levels in 40 years. The invasion has caused new supply shocks, reducing global supplies of oil, natural gas, […]
The Fed Continues to Deflate the Bubbles
Will we experience another 2018? Markets are betting that we will, but they ignore important differences between then and now. The Federal Reserve gradually began reversing its extraordinary monetary policies from the financial crisis in 2015. In 2018, the Fed raised interest rates and withdrew liquidity from the economy. The effects were sudden and significant. […]
Fed Policy Changes Cause Markets and the Economy to React
Will the Federal Reserve and most investors be very wrong two years in a row? Market prices, especially futures prices, indicate most investors join Fed officials in believing the Fed won’t have to do much to dampen inflation and return economic growth to pre-pandemic levels. They also expect high profit margins to continue. They were […]
Inflation and Economic Growth Aren’t Transitory
Central banks are curtailing their pandemic stimulus measures, and investors need to assess how that will affect different investments. As expected, the Federal Reserve announced that in November it would begin reducing its monthly asset purchases of $120 billion with the goal of eliminating those extra asset purchases by June 2022. That doesn’t mean the […]
The Economy and Stocks Start to Diverge
The tight relationship between the economy and markets might be ending. For some time, economic growth has been accompanied by higher stock prices, and stock indexes faltered when growth slowed or declined. Going forward, it is likely economic growth will continue while the stock indexes remain in a trading range or decline. Growth should continue […]
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Warren Buffett
