Japan’s Footsteps

After improving economic prospects earlier this year, Japan has abruptly reversed course.  A third-quarter annualized GDP reading of negative -.8% puts Japan back in a technical recession (defined as two quarters of negative GDP growth). Following stimulative policies (aka "Abenomics") by Prime Minister Shinzo Abe and a blossoming recovery from 2014's technical recession, many assumed … Continue reading Japan’s Footsteps

Full Swing Voting

Following a choppy third quarter, global markets have made a comeback.   Since October 1, the S&P 500 and EAFE have both rebounded over 5%, and emerging markets have bounced by more than 8%. Strangely enough, the same fears that stoked the sell-off also seem to be fueling the rally.  Investors who disliked the uncertainty … Continue reading Full Swing Voting

Has Janet Lost Her Patience?

Speculation has been rampant about when Janet Yellen and the Federal Reserve will finally begin raising interest rates.  Last month all the buzz was focused on whether Yellen would drop the word "patient" (with respect to rate increases) from her scheduled Fed policy statement.   She did, and ever since strategists and traders all up … Continue reading Has Janet Lost Her Patience?

Mid-Year Summary

Despite a surprise slowdown of US economic growth in the first quarter, the stock market has continued to climb higher. The S&P 500 is up by over 7% year-to-date. US equity REITs have been especially strong, already returning more than 17% so far in 2014. Meanwhile, the benchmark 10 year US Treasury yield has fallen … Continue reading Mid-Year Summary

Twist and Shout

The markets are quivering in anticipation of what the Federal Reserve may or may not announce later today.  The consensus is that it will decide on implementing "Operation Twist."  In this situation, the Fed would maintain short-term rates while reaching out to lower long-term rates, effectively "twisting" the yield curve. The idea is that lowering long-term rates will encourage borrowing, spending, and investment. However, … Continue reading Twist and Shout

Bernanke Put

The markets seem to be hoping that good ol' helicopter Ben will come through with another round of quantitative easing (QE) tomorrow.  Doing so would extend the legacy of  the "Greespan Put" and probably ignite a speculative risk-on rally.  Analysts like Dave Rosenberg and Bill McBride have pointed out how equity markets seem to be dancing around the Fed's QE activities, shown for … Continue reading Bernanke Put

The Game Must Go On

This morning Ben Bernanke, Chairman of the Federal Reserve (the US central bank aka the Fed), delivered his semiannual report on monetary policy to Congress.  During the report, Bernanke said, “the possibility remains that the recent economic weakness may prove more persistent than expected, and that deflationary risks might reemerge, implying a need for additional policy support.”  … Continue reading The Game Must Go On