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Stock Markets and the Economy

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The Fed vs. Inflation: The Battle Continues

September 29, 2022

Stagflation is the economic environment that’s most damaging to financial assets. The combination of a weak economy and high inflation hurts both stocks and bonds. We’re likely entering a period of stagflation. The economy is slowing because of the Fed’s actions. The housing market probably has declined more than any other sector. Prices for many […]

Markets Are Betting That Inflation Is Collapsing

August 31, 2022

In the July issue, I asked, “Which will break first: inflation, the economy, or the Federal Reserve?” Futures market prices indicate, as they have all year, that investors expect inflation to fall to the Fed’s target after modest interest rate increases and without triggering a recession or reduction in earnings growth. The July Consumer Price […]

The Pain Period Will Continue

August 2, 2022

We’re in the pain period of the economic and investment cycle. The pain began when inflation accelerated in the first half of 2022. The pain has increased since the Federal Reserve decided it was wrong about inflation and had to tighten monetary policy more than planned. The Fed fell so far behind in dealing with […]

We’re in the Peaking Process

June 30, 2022

Which will break first: inflation, the economy or the Federal Reserve? Futures mar- kets show that investors believe infla- tion is peaking and soon will return to pre-2021 levels. Investors believe the Fed won’t have to tighten much more, there won’t be a recession, and interest rates will be lower in a year or two […]

Inflation, Rising Rates, Falling Stocks and More, Oh My!

June 10, 2022

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

May 26, 2022

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

May 5, 2022

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

March 25, 2022

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, […]

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