After stabilizing in late-June/early July, the US stock market has continued to rebound. The S&P 500 appears on track to post its fifth straight weekly advance, based on trading through yesterday’s close (Aug. 16). Encouraging, although all the risk factors that unleashed a powerful run of selling in the first half of the year are still lurking. That includes high inflation, rising interest rates and elevated geopolitical tension vis-à-vis Russia and China. But for the moment, the trend if friendly, leaving the crowd to decide if this is a bear market rally or the start of a new extended bull run.
Yearly Archives: 2022
Macro Briefing: 17 August 2022
* Biden signs climate and health care bill into law
* Ukraine widens attacks on Russian-controlled territory in Crimea
* America’s retirement crisis is getting worse
* China’s stimulus efforts to boost slowing economy are relatively mild
* UK inflation reaches another new 40-year high in July
* US industrial production rebounds more than expected in July
* Heatwave in China is forcing factories to close
* Q3 GDP rebound for US revised down to +1.8% via GDPNow model
* US housing starts continue to weaken, falling to slowest pace since early 2021:
Short-Term Bonds Are Savior For Fixed-Income Strategies This Year
The rout in bonds so far in 2022 has been deep and wide, with a notable exception: short maturities, which have provided valuable stability that’s otherwise in short supply.
Macro Briefing: 16 August 2022
* Russian military base in Crimea hit by a series of explosions
* Recession worries take a bite out of oil prices
* China’s housing market weakens in July after briefly stabilizing
* Weak economic data in US and China weigh on commodities prices
* US gasoline prices may continue falling to $3 a gallon, says analyst
* German sentiment among financial analysts near all-time low in August
* US homebuilder sentiment points to recession for housing sector
* NY Fed Mfg Index falls re: current conditions, indicating contraction in August:
Global Markets Continued To Rebound Last Week
Nearly all the major asset classes posted gains in the trading week through Friday, Aug. 12, based on a set of proxy ETFs. Despite the upside bias in prices, the crowd will continue to wrestle with deciding if the recovery is a bear market rally for risk-on or the start of a new bull market.
Macro Briefing: 15 August 2022
* China conducts military drills around Taiwan as US lawmakers visit
* US will roll out new Taiwan trade support and conduct air, sea transits
* China cuts interest rates as economic slowdown deepens
* Will Fed’s Powell outline new thinking on quantitative tightening at Jackson Hole?
* US employers struggle to find workers
* Most traders see a recession starting this year, survey finds
* US consumer sentiment rebounds in August, rising to 3-month high:
Book Bits: 13 August 2022
Edward Chancellor
Review via The Economist
The critics who label as artificial the low interest rates that have prevailed in the world economy in recent decades must therefore answer the question: low relative to what?
“The Price of Time” is the answer of Edward Chancellor, a historian and financier who has written a book by that name. Humans prefer jam today to jam tomorrow. Interest rates are the reward for deferring gratification, for renting out money that could have been spent today. When rates fall too low, grave consequences follow: financial instability, higher inequality and pain for savers. As he makes his case, Mr Chancellor’s panoptic survey of the history of interest, and what classical economists said about it, will not fail to dazzle. The argument, however, is seriously flawed.
Peak Inflation Watch: 12 August 2022
The latest inflation numbers for the US suggest that the recent surge in pricing pressure has peaked… maybe. The bigger risk is that consumer inflation remains elevated. If so, that’s a significant headwind for the economy and financial markets, even if the consumer price index (CPI) is no longer accelerating.
Macro Briefing: 12 August 2022
* House expected to approve a climate and healthcare bill today
* Ukrainian nuclear plant faces ‘grave hour’ due to potential radiation leak
* UK economy contracts in second quarter
* US home prices rise to new record high in second quarter
* Eurozone industrial output rose more than expected in June
* Global population may be peaking at roughly 8 billion
* Arctic heating up 4x faster than Earth overall, research finds
* US jobless claims rise to highest level since November:
10-Year Treasury Yield ‘Fair Value’ Estimate: 11 August 2022
The US 10-year Treasury yield continues to trade below its recent peak. Yesterday’s softer-than-expected rise in consumer inflation for July supports a case for expecting the 10-year rate to stay below 3% for the near term. A similar analysis can be made based on today’s update of CapitalSpectator.com’s fair-value ensemble model for this benchmark yield.