For investors searching for yield in today’s environment of inflation uncertainty and rising interest-rate risk, a multi-sector, credit-oriented investment approach that actively seeks to take advantage of opportunities across the spectrum of investment sectors may be a potential solution. Join us on October 20th when we delve into the current investment backdrop and reveal how credit sectors have historically performed well when rates are on the rise.
After beginning the quarter on a relatively upbeat note, familiar themes returned as fears of inflation, ambiguity over the end of the pandemic, and uncertainty about the future of Chinese capitalism raised concerns for investors.
Given record profit margins and valuations, there is little upside, especially if inflation remains problematic. Throw stagflation into the formula, and the outlook is bleak.
Global bond investors face an old enemy -- inflation -- and the universe of fixed-income assets doesn’t look to offer much in the way of shelter.
Older borrowers will be among the hardest hit when student-loan payments resume for more than 40 million Americans after a pandemic freeze, according to research by Fidelity Investments Inc.
We touch on several bases today as we often do. We begin with the Fed which decided to start reducing its monthly purchases of Treasury bonds and mortgage-backed securities in November. This was not a surprise.
Look forward to moderating inflation, 2% to 3% growth and full employment in 2022, according to Ben Bernanke.
"Travel on all roads and streets changed by +8.3% (+21.0 billion vehicle miles) for August 2021 as compared with August 2020. Travel for the month is estimated to be 273.8 billion vehicle miles." The 12-month moving average was up 0.7% month-over-month and up 4.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was up 0.64% month-over-month and up 3.7% year-over-year.
We are in uncharted waters on many fronts, so no one can really answer that inflation/deflation question with any degree of certainty. We can however, look to the technical condition of commodity markets for guidance, since they have usually, acted as a barometer for more generalized swings in inflationary and deflationary pressures. Commodity prices look poised to signal a new secular bull market, which would likely broaden out to result in the highest more generalized inflation rates since the 1970’s.
The age of abundance has given way to an age of scarcity, while the pro-cyclical version of inflation may have given way to the counter-cyclical version.
New projections of the labor force growth rate by the US Bureau of Labor Statistics show the US labor force growth accelerating in the 2020s for the first time since the 1970s.
As of October 18, the price of Regular and Premium were up six and five cents each, respectively, from the previous week. According to GasBuddy.com, California has the highest average price for Regular at $4.49 and Texas has the cheapest at $2.95. The WTIC end-of-day spot price closed at 81.69, up 1.5% from last week and up 72% from the beginning of the year. Both gas prices and WTIC are at their highest levels since 2014.
Volatile, pandemic-riven markets for stocks and bonds has Wall Street ready — again — to declare the traditional 60/40 portfolio split a dead strategy. The prospect of a low-growth, high-inflation economy (stagflation) dims the prospects of both investment categories, and certainly demands a rethink of where to stash your savings.
Demand is so strong for green bonds, or debt that funds environmentally friendly projects, that investors are accepting lower yields for securities that are harder to trade, according to Barclays Plc.
In a society with a weak social safety net, homelessness is the inevitable result of exuberant real estate prices. Those living on the street are the indirect victims of loose monetary policy and low interest rates that foster high property and rental prices.
If there was a word of the year for 2021, it would be “transitory.” Ever since the Fed declared that inflation would be transitory in March 2021, analysts have challenged that assertion and, indeed, have questioned the definition of transitory. Inflation has broad ramification for financial plans, since it affects interest rates, the price of assets and whether cash flows will be sufficient to keep pace with rising prices of goods and services. Here to discuss that question is James Montier, the co-author of two recent commentaries on the likelihood of transitory inflation and how investors should protect against various outcomes.
Politics today is in large part about pitting one group against another and convincing one side they've been treated unfairly. One of those groups is the younger generation of workers known as Millennials, who are supposedly up to their eyeballs in debt and lagging well behind prior generations.
The Fed's more hawkish stance at September’s FOMC meeting, rising upside inflation pressures, and near-term volatility drove Treasury yields higher at the end of the month.
The media and the economics profession are treating inflation like it is a friendly puppy dog. They think you can take it out of its pen and play with it for a while. The popular theory is that you bring it out in a severe dip in economic activity and when the economy gets back on its feet, you kindly ask inflation to crawl back into its pen like any good puppy dog would do.
Month-over-month nominal sales in September were up 0.74% and up 14% YoY. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.32% and were up 8.1% YoY.
Is the risk of a more significant correction over now that the expected 5% decline is complete? That was a hotly debated question after this past weekend’s newsletter supporting the idea of a reflexive rally into year-end.
Today's report on Industrial Production for September shows a 1.29% decrease month-over-month, which was worse than the Investing.com consensus of 0.2%. The year-over-year change is 4.62%, down from last month's YoY increase.
We have announced our Venerated Voices™ awards for commentaries published in Q3 2021.
We’re all familiar with inflation. But did you know there’s another form of inflation that’s just as corrosive on our purchasing power and yet is nearly impossible to measure? Read on to learn more.
The ongoing, intensifying supply chain problems are raising costs in ways that add broad inflation pressure everyone will feel. And the zeitgeist in the workplace is literally changing before our eyes.
The S&P saw gains four out of five days this week and regained some of its losses from September. The index is up 19.04% YTD and is just 1.45% below its record close.
The yield on the 10-year note ended October 15, 2021, at 1.59%, the 2-year note ended at 0.41%, and the 30-year at 2.05%.
Supply chains typically aren’t something the average person needs to think about too much. When they’re working, these high-tech, globalized networks of parts suppliers, assemblers, shippers, and distributors allow companies to make and move goods around the world so quickly and cheaply that it’s tempting to take them for granted.
Concerns about China’s slowing economy have focused on issues affecting property and manufacturing. But these are only part of the story. Investors seeking a fuller understanding of the risks and opportunities need to take a broader perspective.
FINRA has released new data for margin debt, now available through September. The latest debt level is down 0.92% month-over-month.
After solid performance in both July and August, the S&P 500 was considerably weaker in September. It was more than just passing weakness, however. The stock market looked much less the cocksure prize fighter than the contender who took a shot to the jaw that wobbled his knees.
This morning's late release of the publicly available data from ECRI puts the WLI at 154.7, up 1.2 from the previous week's revised figure. The WLIg is at 3.3, up from last week and the WLI YoY is at 10.06%, also up from last week.
The October Preliminary came in at 71.4, down 1.4 (1.9%) from the September Final. Investing.com had forecast 73.1. Since its beginning in 1978, consumer sentiment is 17 percent below the average reading (arithmetic mean) and 16.1 percent below the geometric mean.
This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 19.8 was a decrease of 14.5 from the previous month's 34.3 . The Investing.com forecast was for a reading of 27.
An energy crunch has money mangers going all-in on energy ETFs to such a degree that they may be limiting the potential for fresh gains.
September closed with a whimper (from folks hoping the seven-month stretch of positive performance months for the S&P 500 would make it to eight). The month also held true to the history of September being the worst month for performance on average since the index’s inception in 1928.
We've updated this series to include the September release of the Consumer Price Index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $44,717, down 6.3% from 45-plus years ago. Hourly earnings are near their all-time high after adjusting for inflation.
Fed funds futures for 2022 and 2023 have broken out to new highs, likely on the back of rising inflation expectations. As things stand now, the market is looking for three hikes by the end of 2023, with the effective fed funds moving from 8bps today to 85bps.
The Delta variant’s impact on supply chains and domestic spending slowed economic activity in the third quarter. Consumer confidence dipped noticeably, and businesses’ outlook dimmed somewhat. Rising inflation, the product of goods and labor shortages, has been a concern.
We all remember the COVID-19 recession which occurred in early 2020. It was a severe recession which saw GDP plunge over 30% last spring during the widespread lockdowns. The good news was the lockdowns ended quickly and the economy recovered all its losses, and then some, in the 3Q of last year. It’s been on a roll ever since.
The Consumer Price Index for Urban Consumers (CPI-U) released this week puts the year-over-year inflation rate at 5.39%. It is above the 3.76% average since the end of the Second World War and above its 10-year moving average, now at 1.80%.
Note: This commentary has been updated with the latest numbers from the latest Employment Report for September. Consider: Today nearly one in three of the 65-69 cohort and one in five of the 70-74 cohort are in the labor force.
Using my company’s data that shows the performance of various subject lines, I’ll discuss the types that are working best and how to write your own version to communicate with clients.
As Mark Twain might have put it, the demise of debt’s value within the long-favored 60-40 stock-bond diversified portfolios is greatly exaggerated -- when you adjust for risk.
Inflation debates have been dominated by fallout from the pandemic and economic reopening, most of which has been viewed as transitory: lumber and used car prices in the first half of the year, the cost of ocean freight more recently.
This morning's seasonally adjusted 293K new claims, down 36K from the previous week's revised figure, was below the Investing.com forecast of 319K.
This morning's release of the September Producer Price Index (PPI) for Finished Goods was at 0.5% month-over-month seasonally adjusted, down from a 0.6% increase last month. It is at 8.6% year-over-year, up from 8.3% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.2% MoM, down from the 0.5% previous month and is up 6.8% YoY NSA. Investing.com MoM consensus forecasts were for 0.6% headline and 0.5% core. The September PPI for Final Demand was at 0.5% month-over-month seasonally adjusted, down from a 0.7% increase last month.
Retirees are poised to benefit from the largest increase in Social Security benefits in the last 40 years.
The latest full set UIG for September is 4.03% while the prices-only measure is 4.01%. Current Headline CPI is now 5.39% and Core CPI is 4.03%.
The strong economic and market trends of the first half of 2021 wavered during the third quarter. The coronavirus delta variant caught up with the US at the height of the summer, just as vaccinations slowed and concerns grew that inflation might flare and persist.
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here?
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
Today's supply and inflation challenges stem from Brexit.
For planners, no forecast is more critical than whether inflation will be transitory or long-lasting. One perilous path that will lead to permanent inflation is continued fiscal spending aimed to boost consumer demand.
The 20th century Baby Boom was one of the most powerful demographic events in the history of the United States. We've created a series of charts to show seven age cohorts of the employed population from 1948 to the present.
It’s taken just a few short months for stagflation to go from hobgoblin of cranks to a full-blown Wall Street obsession.
A new study has made explosive claims about the world’s largest stock benchmark: Major U.S. corporations that purchase ratings from S&P Global Inc. have a higher chance of entering the S&P 500 Index -- even when they don’t meet all criteria for inclusion.
The recent synchronized selloff in equities and Treasuries was likely just the beginning of what’s to come for the popular 60/40 stock-bond portfolio strategy, a growing chorus of Wall Street strategists warn.
The Bureau of Labor Statistics released the September Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 5.39%, up from 5.25% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 4.03%, mostly unchanged from 4.00% the previous month and is above the Fed's 2% PCE target.
The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution).
We've updated our monthly workforce analysis to include the latest Employment Report for September. The unemployment rate dropped to 4.8%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 194K.
What does the ratio of unemployment claims tell us about where we are in the business cycle and recession risk?
Looking ahead, new sources of inflation may continue to arise. Unless the mounting pressures push inflation to significantly higher levels that would provoke central banks into aggressive tightening, the impact on global stock markets may be a positive.
In 2009, after overly strict mark-to-market accounting rules were altered, we said the Financial Crisis was over. It was hard to get our voice heard, though, because both sides of the political aisle were busy saying the economy stunk.
Given a potential inflationary environment and sell-offs in Chinese equities, we have taken great care to trim weightings in China, and we have made adjustments to reduce holdings with extended valuations and increase holdings that are well-suited to transmit pricing power or have more attractive valuations.
Are inflation forecasts reliable enough to shape policy?
The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through August, is now available.
Just because pandemic inflation is transitory doesn’t mean it’s going away anytime soon.
The headline number for September came in at 99.1, down 1.0 from the previous month. The index is at the 44th percentile in this series.
At present, multiple jobholders account for 4.6 percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.
Let's take a closer look at Friday's employment report numbers on Full and Part-Time Employment.
Investors need to understand the differences between Chinese capitalism and Western capitalism in order to properly assess the opportunities in China. Meanwhile, norms in India more closely resemble those in the United States— but India has dramatically larger headroom for growth.
The latest monthly employment report showed a gain of 194K nonfarm jobs, which consists of a gain of 142K service-providing jobs and a gain of 52K goods-producing jobs.
The greatest economic challenge of the second half of the 20th century was over how to fight the crippling inflation of the 1970s. It pitted the monetarist Milton Friedman against the Keynesian Paul Samuelson, and the debate between the two shaped economic thinking and policymaking to this day.
The fact we have the lowest interest rates in 5000-years is indicative of the economic challenges we face.
Several events will have major influences on the global economy in the months ahead.
There was another “disappointing” gain in nonfarm payrolls in September (up 194,000, vs. a median forecast of +500,000), but it’s not as bad as it looks. Less hiring at the start of the school year resulted in a decline in (adjusted) education jobs.
US stocks, as seen by the S&P 500, ended the third quarter unchanged, having shed over 4% in September as fears over the debt ceiling and the Fed’s options erased the summer’s progress. Certainly, the market environment has changed a lot over the past 18 months. Valuations are up, economic data is varied, and the prospects of potential Fed action are growing.
Dividend Contenders are high-quality dividend growth stocks that have increased their dividends for 10 up to 24 years. Therefore, they offer investors the opportunity to receive a growing dividend income stream to help keep up with inflation.
Bitcoin topped $56,000 on Friday for the first time since May as a number of positive crypto developments galvanized investors in the month of “Uptober.”
Historical comparisons are always risky. This is particularly so when comparing different eras in vastly different countries like the US and China. Similarities can actually obscure more important differences.
This commentary has been updated to include this morning's release of Nonfarm Employment. September's 194K increase in total nonfarm payrolls had revisions that resulted in 169K more jobs than previously reported. The Investing.com consensus was for 500K jobs gained and the unemployment rate to fall to 5.1%.
Investors pulled $2.54 billion from investment-grade bond funds for the week ended Oct. 6, marking the biggest withdrawal since April 2020, data from Refinitiv Lipper show.
This morning's employment report for September showed a 194K increase in total nonfarm payrolls, which was below the Investing.com forecast of 500K jobs added.
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $20,803 for an annualized real return of 14.7%.
Here is a summary of the four market valuation indicators we update on a monthly basis.
Take a look at real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite since 2000. We've updated this through the September 30, 2021 close.
Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns.
In yesterday morning's ADP employment report we got the September estimate of 568K nonfarm private employment jobs gained, an increase over August's revised 340K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics.
Economic Insights
Bond Investing in the Face of Uncertainty: A Multi-Sector Approach
For investors searching for yield in today’s environment of inflation uncertainty and rising interest-rate risk, a multi-sector, credit-oriented investment approach that actively seeks to take advantage of opportunities across the spectrum of investment sectors may be a potential solution. Join us on October 20th when we delve into the current investment backdrop and reveal how credit sectors have historically performed well when rates are on the rise.
Q3 2021 Market Perspectives: "A Global Shift"
After beginning the quarter on a relatively upbeat note, familiar themes returned as fears of inflation, ambiguity over the end of the pandemic, and uncertainty about the future of Chinese capitalism raised concerns for investors.
Persistent Inflation Poses a Genuine Threat to Stock Prices
Given record profit margins and valuations, there is little upside, especially if inflation remains problematic. Throw stagflation into the formula, and the outlook is bleak.
Bond Investors Face Year of Peril With Few Places to Hide
Global bond investors face an old enemy -- inflation -- and the universe of fixed-income assets doesn’t look to offer much in the way of shelter.
Boomers Face Higher Student-Loan Bills When U.S. Moratorium Ends
Older borrowers will be among the hardest hit when student-loan payments resume for more than 40 million Americans after a pandemic freeze, according to research by Fidelity Investments Inc.
Fed To Taper, Inflation Rising, Retail Shortages Coming
We touch on several bases today as we often do. We begin with the Fed which decided to start reducing its monthly purchases of Treasury bonds and mortgage-backed securities in November. This was not a surprise.
Bernanke: Inflation will Moderate in 2022 with 2% to 3% Growth and Full Employment
Look forward to moderating inflation, 2% to 3% growth and full employment in 2022, according to Ben Bernanke.
America's Driving Habits as of August 2021
"Travel on all roads and streets changed by +8.3% (+21.0 billion vehicle miles) for August 2021 as compared with August 2020. Travel for the month is estimated to be 273.8 billion vehicle miles." The 12-month moving average was up 0.7% month-over-month and up 4.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was up 0.64% month-over-month and up 3.7% year-over-year.
Impending Super Cycle Commodity Signal Argues Against Transitory Inflation
We are in uncharted waters on many fronts, so no one can really answer that inflation/deflation question with any degree of certainty. We can however, look to the technical condition of commodity markets for guidance, since they have usually, acted as a barometer for more generalized swings in inflationary and deflationary pressures. Commodity prices look poised to signal a new secular bull market, which would likely broaden out to result in the highest more generalized inflation rates since the 1970’s.
The Beast of Burden of Inflation
The age of abundance has given way to an age of scarcity, while the pro-cyclical version of inflation may have given way to the counter-cyclical version.
For The First Time Since the 70s, Demographics Support Higher Rates
New projections of the labor force growth rate by the US Bureau of Labor Statistics show the US labor force growth accelerating in the 2020s for the first time since the 1970s.
Weekly Gasoline Prices: WTIC Highest Since 2014
As of October 18, the price of Regular and Premium were up six and five cents each, respectively, from the previous week. According to GasBuddy.com, California has the highest average price for Regular at $4.49 and Texas has the cheapest at $2.95. The WTIC end-of-day spot price closed at 81.69, up 1.5% from last week and up 72% from the beginning of the year. Both gas prices and WTIC are at their highest levels since 2014.
The 60/40 Portfolio Isn't Dead, Just More Expensive: Allison Schrager
Volatile, pandemic-riven markets for stocks and bonds has Wall Street ready — again — to declare the traditional 60/40 portfolio split a dead strategy. The prospect of a low-growth, high-inflation economy (stagflation) dims the prospects of both investment categories, and certainly demands a rethink of where to stash your savings.
Barclays Says Green Bond Investors Pay More for Less Liquidity
Demand is so strong for green bonds, or debt that funds environmentally friendly projects, that investors are accepting lower yields for securities that are harder to trade, according to Barclays Plc.
Fed Policy is Driving Homelessness
In a society with a weak social safety net, homelessness is the inevitable result of exuberant real estate prices. Those living on the street are the indirect victims of loose monetary policy and low interest rates that foster high property and rental prices.
James Montier on Whether Inflation will be Transitory
If there was a word of the year for 2021, it would be “transitory.” Ever since the Fed declared that inflation would be transitory in March 2021, analysts have challenged that assertion and, indeed, have questioned the definition of transitory. Inflation has broad ramification for financial plans, since it affects interest rates, the price of assets and whether cash flows will be sufficient to keep pace with rising prices of goods and services. Here to discuss that question is James Montier, the co-author of two recent commentaries on the likelihood of transitory inflation and how investors should protect against various outcomes.
Monday Morning Outlook: Respect Millennials
Politics today is in large part about pitting one group against another and convincing one side they've been treated unfairly. One of those groups is the younger generation of workers known as Millennials, who are supposedly up to their eyeballs in debt and lagging well behind prior generations.
Monthly Municipal Market Update, September 2021
The Fed's more hawkish stance at September’s FOMC meeting, rising upside inflation pressures, and near-term volatility drove Treasury yields higher at the end of the month.
Inflation is a Wolverine
The media and the economics profession are treating inflation like it is a friendly puppy dog. They think you can take it out of its pen and play with it for a while. The popular theory is that you bring it out in a severe dip in economic activity and when the economy gets back on its feet, you kindly ask inflation to crawl back into its pen like any good puppy dog would do.
The Big Four: September Real Retail Sales Up 0.74%
Month-over-month nominal sales in September were up 0.74% and up 14% YoY. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.32% and were up 8.1% YoY.
Technically Speaking: Is The Risk Of A Bigger Correction Over?
Is the risk of a more significant correction over now that the expected 5% decline is complete? That was a hotly debated question after this past weekend’s newsletter supporting the idea of a reflexive rally into year-end.
The Big Four - Industrial Production: Down 1.3% in September
Today's report on Industrial Production for September shows a 1.29% decrease month-over-month, which was worse than the Investing.com consensus of 0.2%. The year-over-year change is 4.62%, down from last month's YoY increase.
Venerated Voices™ Q3 2021 Rankings
We have announced our Venerated Voices™ awards for commentaries published in Q3 2021.
What Is Shadow Inflation? It Could Be More Prevalent Than You Realize
We’re all familiar with inflation. But did you know there’s another form of inflation that’s just as corrosive on our purchasing power and yet is nearly impossible to measure? Read on to learn more.
Logistical Sandpiles
The ongoing, intensifying supply chain problems are raising costs in ways that add broad inflation pressure everyone will feel. And the zeitgeist in the workplace is literally changing before our eyes.
S&P 500 Snapshot: Some Losses Regained
The S&P saw gains four out of five days this week and regained some of its losses from September. The index is up 19.04% YTD and is just 1.45% below its record close.
Treasury Snapshot: 10-Year Note at 1.59%
The yield on the 10-year note ended October 15, 2021, at 1.59%, the 2-year note ended at 0.41%, and the 30-year at 2.05%.
Supply Chain Breakdown: Its Causes and Effects
Supply chains typically aren’t something the average person needs to think about too much. When they’re working, these high-tech, globalized networks of parts suppliers, assemblers, shippers, and distributors allow companies to make and move goods around the world so quickly and cheaply that it’s tempting to take them for granted.
Connecting the Dots on China’s Growth Outlook
Concerns about China’s slowing economy have focused on issues affecting property and manufacturing. But these are only part of the story. Investors seeking a fuller understanding of the risks and opportunities need to take a broader perspective.
Margin Debt and the Market: Down 0.92% in September
FINRA has released new data for margin debt, now available through September. The latest debt level is down 0.92% month-over-month.
Areté market review Q3 21
After solid performance in both July and August, the S&P 500 was considerably weaker in September. It was more than just passing weakness, however. The stock market looked much less the cocksure prize fighter than the contender who took a shot to the jaw that wobbled his knees.
ECRI Weekly Leading Index Update
This morning's late release of the publicly available data from ECRI puts the WLI at 154.7, up 1.2 from the previous week's revised figure. The WLIg is at 3.3, up from last week and the WLI YoY is at 10.06%, also up from last week.
Michigan Consumer Sentiment: October Preliminary Continues Dim Pace
The October Preliminary came in at 71.4, down 1.4 (1.9%) from the September Final. Investing.com had forecast 73.1. Since its beginning in 1978, consumer sentiment is 17 percent below the average reading (arithmetic mean) and 16.1 percent below the geometric mean.
Empire State Mfg Survey: Solid Growth in October
This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 19.8 was a decrease of 14.5 from the previous month's 34.3 . The Investing.com forecast was for a reading of 27.
‘Astounding’ Energy ETF Bets Risk Capping Upside Amid Crisis
An energy crunch has money mangers going all-in on energy ETFs to such a degree that they may be limiting the potential for fresh gains.
Flavor of the Weak: Notable End to Some Key Winning Streaks
September closed with a whimper (from folks hoping the seven-month stretch of positive performance months for the S&P 500 would make it to eight). The month also held true to the history of September being the worst month for performance on average since the index’s inception in 1928.
Middle-Class Hourly Wages Near Record High
We've updated this series to include the September release of the Consumer Price Index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $44,717, down 6.3% from 45-plus years ago. Hourly earnings are near their all-time high after adjusting for inflation.
Is Inflation Starting to Impact Equity Returns?
Fed funds futures for 2022 and 2023 have broken out to new highs, likely on the back of rising inflation expectations. As things stand now, the market is looking for three hikes by the end of 2023, with the effective fed funds moving from 8bps today to 85bps.
The Big Short(ages)
The Delta variant’s impact on supply chains and domestic spending slowed economic activity in the third quarter. Consumer confidence dipped noticeably, and businesses’ outlook dimmed somewhat. Rising inflation, the product of goods and labor shortages, has been a concern.
The U.S. Economy Takes Significant Turn For The Worse
We all remember the COVID-19 recession which occurred in early 2020. It was a severe recession which saw GDP plunge over 30% last spring during the widespread lockdowns. The good news was the lockdowns ended quickly and the economy recovered all its losses, and then some, in the 3Q of last year. It’s been on a roll ever since.
Long-Term Look at the CPI
The Consumer Price Index for Urban Consumers (CPI-U) released this week puts the year-over-year inflation rate at 5.39%. It is above the 3.76% average since the end of the Second World War and above its 10-year moving average, now at 1.80%.
Demographic Trends for the 50-and-Older Work Force
Note: This commentary has been updated with the latest numbers from the latest Employment Report for September. Consider: Today nearly one in three of the 65-69 cohort and one in five of the 70-74 cohort are in the labor force.
The Five Elements of Click-Worthy Email Subject Lines
Using my company’s data that shows the performance of various subject lines, I’ll discuss the types that are working best and how to write your own version to communicate with clients.
Bonds Hold Value in 60-40 World, So Long as You Adjust for Risk
As Mark Twain might have put it, the demise of debt’s value within the long-favored 60-40 stock-bond diversified portfolios is greatly exaggerated -- when you adjust for risk.
Wage Growth Is Great. The Long-Term Inflation It Creates Isn’t.: Conor Sen
Inflation debates have been dominated by fallout from the pandemic and economic reopening, most of which has been viewed as transitory: lumber and used car prices in the first half of the year, the cost of ocean freight more recently.
Weekly Unemployment Claims: Down 36K, Beats Forecast
This morning's seasonally adjusted 293K new claims, down 36K from the previous week's revised figure, was below the Investing.com forecast of 319K.
September Producer Price Index: Core Final Demand Up 6.8% YoY
This morning's release of the September Producer Price Index (PPI) for Finished Goods was at 0.5% month-over-month seasonally adjusted, down from a 0.6% increase last month. It is at 8.6% year-over-year, up from 8.3% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.2% MoM, down from the 0.5% previous month and is up 6.8% YoY NSA. Investing.com MoM consensus forecasts were for 0.6% headline and 0.5% core. The September PPI for Final Demand was at 0.5% month-over-month seasonally adjusted, down from a 0.7% increase last month.
Retirees Rejoice: Social Security’s 5.9% Cost-of-Living Increase Is Biggest in 40 Years
Retirees are poised to benefit from the largest increase in Social Security benefits in the last 40 years.
Underlying Inflation Gauge: September Update
The latest full set UIG for September is 4.03% while the prices-only measure is 4.01%. Current Headline CPI is now 5.39% and Core CPI is 4.03%.
Capital Markets Outlook: 4Q:2021
The strong economic and market trends of the first half of 2021 wavered during the third quarter. The coronavirus delta variant caught up with the US at the height of the summer, just as vaccinations slowed and concerns grew that inflation might flare and persist.
Inflation: The Components
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
Why We Aren’t Repeating The Roaring 20’s Analog
No. We are not repeating the “Roaring 20’s” analog. Ben Carlson had a recent post asking if the “Roaring 20’s” are already here?
Components of the CPI: September 2021
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
Mounting Headwinds For The U.K.
Today's supply and inflation challenges stem from Brexit.
The Perilous Path that Leads to Persistent Inflation
For planners, no forecast is more critical than whether inflation will be transitory or long-lasting. One perilous path that will lead to permanent inflation is continued fiscal spending aimed to boost consumer demand.
Baby Boomer Employment - September 2021
The 20th century Baby Boom was one of the most powerful demographic events in the history of the United States. We've created a series of charts to show seven age cohorts of the employed population from 1948 to the present.
Stagflation Is All Anyone in Markets Wants to Talk About Now
It’s taken just a few short months for stagflation to go from hobgoblin of cranks to a full-blown Wall Street obsession.
S&P 500 Membership May Be "For Sale," NBER Research Suggests
A new study has made explosive claims about the world’s largest stock benchmark: Major U.S. corporations that purchase ratings from S&P Global Inc. have a higher chance of entering the S&P 500 Index -- even when they don’t meet all criteria for inclusion.
Banks Analysts Warn That 60/40 Portfolios Could Be Battered by Inflation
The recent synchronized selloff in equities and Treasuries was likely just the beginning of what’s to come for the popular 60/40 stock-bond portfolio strategy, a growing chorus of Wall Street strategists warn.
Consumer Price Index: September Core Mostly Unchanged at 4%
The Bureau of Labor Statistics released the September Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 5.39%, up from 5.25% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 4.03%, mostly unchanged from 4.00% the previous month and is above the Fed's 2% PCE target.
Long-Term Trends in Employment by Age Group
The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution).
U.S. Workforce: September 2021 Update
We've updated our monthly workforce analysis to include the latest Employment Report for September. The unemployment rate dropped to 4.8%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 194K.
The Civilian Labor Force, Unemployment Claims and the Business Cycle
What does the ratio of unemployment claims tell us about where we are in the business cycle and recession risk?
Inflation: Persistently Transitory
Looking ahead, new sources of inflation may continue to arise. Unless the mounting pressures push inflation to significantly higher levels that would provoke central banks into aggressive tightening, the impact on global stock markets may be a positive.
Focus on Data, Not Spin
In 2009, after overly strict mark-to-market accounting rules were altered, we said the Financial Crisis was over. It was hard to get our voice heard, though, because both sides of the political aisle were busy saying the economy stunk.
International and Global Markets Commentary & Investment Outlook
Given a potential inflationary environment and sell-offs in Chinese equities, we have taken great care to trim weightings in China, and we have made adjustments to reduce holdings with extended valuations and increase holdings that are well-suited to transmit pricing power or have more attractive valuations.
Revisiting Inflation Expectations
Are inflation forecasts reliable enough to shape policy?
Job Openings & Labor Turnover: August 2021 Update
The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through August, is now available.
Inflation Casts a Longer Shadow After Week of Wild Price Spikes
Just because pandemic inflation is transitory doesn’t mean it’s going away anytime soon.
NFIB Small Business Survey: Slip in September
The headline number for September came in at 99.1, down 1.0 from the previous month. The index is at the 44th percentile in this series.
Multiple Jobholders are 4.6% of All Employed
At present, multiple jobholders account for 4.6 percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.
Full-time and Part-time Employment: A Deeper Look
Let's take a closer look at Friday's employment report numbers on Full and Part-Time Employment.
Our Take on China and India
Investors need to understand the differences between Chinese capitalism and Western capitalism in order to properly assess the opportunities in China. Meanwhile, norms in India more closely resemble those in the United States— but India has dramatically larger headroom for growth.
September Employment: Services Vs. Goods Producing Jobs
The latest monthly employment report showed a gain of 194K nonfarm jobs, which consists of a gain of 142K service-providing jobs and a gain of 52K goods-producing jobs.
Samuelson, Friedman and the Debate that Shaped Economic Policy
The greatest economic challenge of the second half of the 20th century was over how to fight the crippling inflation of the 1970s. It pitted the monetarist Milton Friedman against the Keynesian Paul Samuelson, and the debate between the two shaped economic thinking and policymaking to this day.
The 5000-Year View Of Rates & The Economic Consequences
The fact we have the lowest interest rates in 5000-years is indicative of the economic challenges we face.
Top Economic Risks For The Fourth Quarter
Several events will have major influences on the global economy in the months ahead.
The September Employment Report
There was another “disappointing” gain in nonfarm payrolls in September (up 194,000, vs. a median forecast of +500,000), but it’s not as bad as it looks. Less hiring at the start of the school year resulted in a decline in (adjusted) education jobs.
Q3 2021 Market Commentary Answers to Our Most Recent Client Questions
US stocks, as seen by the S&P 500, ended the third quarter unchanged, having shed over 4% in September as fears over the debt ceiling and the Fed’s options erased the summer’s progress. Certainly, the market environment has changed a lot over the past 18 months. Valuations are up, economic data is varied, and the prospects of potential Fed action are growing.
11 Dividend Contenders For Growth And Income
Dividend Contenders are high-quality dividend growth stocks that have increased their dividends for 10 up to 24 years. Therefore, they offer investors the opportunity to receive a growing dividend income stream to help keep up with inflation.
"Uptober" Doesn't Disappoint as Bitcoin Touches $56,000
Bitcoin topped $56,000 on Friday for the first time since May as a number of positive crypto developments galvanized investors in the month of “Uptober.”
China’s Gilded Age Is Over
Historical comparisons are always risky. This is particularly so when comparing different eras in vastly different countries like the US and China. Similarities can actually obscure more important differences.
The Big Four Economic Indicators: September Employment
This commentary has been updated to include this morning's release of Nonfarm Employment. September's 194K increase in total nonfarm payrolls had revisions that resulted in 169K more jobs than previously reported. The Investing.com consensus was for 500K jobs gained and the unemployment rate to fall to 5.1%.
Investors Yank Most Cash From High-Grade Bond Funds in 18 Months
Investors pulled $2.54 billion from investment-grade bond funds for the week ended Oct. 6, marking the biggest withdrawal since April 2020, data from Refinitiv Lipper show.
September Jobs Report: 194K New Jobs, Worse Than Forecast, But Unemployment Rate Down to 4.8%
This morning's employment report for September showed a 194K increase in total nonfarm payrolls, which was below the Investing.com forecast of 500K jobs added.
The Latest Look at the Total Return Roller Coaster
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $20,803 for an annualized real return of 14.7%.
Is the Market Still Overvalued?
Here is a summary of the four market valuation indicators we update on a monthly basis.
The S&P 500, Dow and Nasdaq Since Their 2000 Highs
Take a look at real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite since 2000. We've updated this through the September 30, 2021 close.
September 2021: Market Valuation, Inflation and Treasury Yields
Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns.
A Closer Look at Yesterday's ADP Employment Report
In yesterday morning's ADP employment report we got the September estimate of 568K nonfarm private employment jobs gained, an increase over August's revised 340K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics.