Tag: Federal Reserve

Recession or Head Fake?

With the Federal Reserve’s action this week in cutting interests rates by one quarter of one percent, the word “recession” is back in the news as a possibility. There must be literally nothing else financially speaking to talk about. In the meantime, check out two really good slides.

The first slide (above) outlines the vast difference of:

  • when a recession really occurs in the economy
  • when markets anticipate the recession and react
  • versus when the government (the NBER, National Bureau of Economic Research) “declares” a recession.

Continue reading “Recession or Head Fake?”

Interest Rate Changes Amidst Election Seasons

The Fed Chairman, Jerome Powell, and the US Federal Reserve are between a rock and a hard place.

There is far too much that can be said on the topics of where interest rates should be and the timing of when interest rates will be adjusted (most likely lower in the near future). To sum it up: politics, political opinions and political pundits – not to mention political candidates of both parties – have now entered the picture, clouding the views of regular people on the street even smarter investors attuned to the finer points of stock and bond markets.

Continue reading “Interest Rate Changes Amidst Election Seasons”

Interest Rates, The Fed & Market Highs

Today’s edition of TGIF 2 Minutes is worth a comparison to this past February’s archives – just 6 months ago – and was originally titled, “Interest Rates, The Fed & Gray Hair.” In today’s re-run, readers will learn that the US Federal Reserve lowering interest rates is not the only mechanism able to cause the stock market to go up. Sometimes markets go up due to other factors including momentum or continued consumer spending, as in the past 6 months.

Question asked in February 2024:

How soon might the US Fed lower rates and how fast might the markets keep going up or falter down?

A certain amount of gray hair (read: wisdom and experience) helps in understanding the current interest rate and US Federal Reserve environment. Why? Because economies do not move as fast as same-day or even same-month. And “gray hairs” know this.

Continue reading “Interest Rates, The Fed & Market Highs”

How Long Does It Take to Tame Inflation?

  • Excerpts from a TGIF 2 Minutes written 11 1/2 months ago follow.
  • Today, the US Fed is not finished raising interest rates.
  • Inflation is still around for multiple reasons.
  • Note the emphasized comments in bold.

Wind back to October 2022: A question that may be on a number of people’s minds was, “How long will it take to tame inflation?” Unfortunately, there was very little telling. Part of the reason is that inflation is always part of a complicated economy. Predictions about the timing of inflation (and hard-landing/soft-landing) are nearly impossible.

To add to the confusion, emotions – specifically people’s expectations of inflation – are part of what keeps inflation around. In this inflationary cycle (as of October 2022), inflation had already stuck around longer than at almost any time in US history; long enough to increase people’s expectations that inflation would not go away quickly. The US Fed had stated one of its original intentions was to lower consumers’ inflationary expectations. But the Fed may have missed that boat late in 2021 due to forces out of its control, namely, the pandemic aftermath. Note that today in late September 2023 inflation is still running strong.

Continue reading “How Long Does It Take to Tame Inflation?”

Markets & Taming Inflation

Believe it or not, the following is taken from October 2022 (with a couple of updates). Inflation almost always takes longer to tame than we think.

A question that may be on a number of people’s minds is: How long will it take to tame inflation? Unfortunately, there is very little telling how long it will take the US Federal Reserve, or any other entity or force, to tame inflation, especially in the short-term. Part of the reason is because inflation is always part of a complicated economy – with diverse people, businesses and governmental/fiscal forces in action. Timing (and hard-landing/soft-landing) predictions about inflation are nearly impossible.

Video: TGIF – Markets & Taming Inflation

Continue reading “Markets & Taming Inflation”

How Long Will It Take To Tame Inflation?

A question that may be on a number of people’s minds is: How long will it take to tame inflation? Unfortunately, there is very little telling how long it will take the US Federal Reserve, or any other entity or force, to tame inflation especially with respect to the short-term. Part of the reason is because inflation is always part of a complicated economy – an economy with diverse people, businesses, and governmental/fiscal forces in action. Making timing (and hard landing/soft-landing) predictions about inflation is nearly impossible.

To add to the confusion, believe it or not emotions – specifically people’s expectations of inflation – are part of what keeps inflation around. In this inflationary cycle, inflation has stuck around longer than at almost any time in US history; long enough to increase people’s expectations that inflation will not go away quickly. The US Fed had stated one of its original intentions was to lower consumers’ inflationary expectations (but the Fed may have missed this boat due to forces out of its control, namely, the pandemic aftermath).

Continue reading “How Long Will It Take To Tame Inflation?”

Reality Bites

Today’s TGIF 2 Minutes was delayed to reflect a speech given earlier today in Jackson Hole, WY by US Federal Reserve Chair, Jerome Powell.

Earlier today (Friday) US Federal Reserve Chairman Jerome Powell spoke in a widely anticipated speech at an annual meeting of the Kansas City Federal Reserve Bank. The market and investing worlds were looking for guidance from the Fed Chair regarding interest rates and future inflation. Part of the reason for the speech being so closely watched goes back to a former Fed Chair. For those old enough to remember, in December 1996 Alan Greenspan made a now famous speech that rocked the markets when he coined the term, “irrational exuberance.” Then Fed Chairman Greenspan commented,

  • “How do we know when irrational exuberance has unduly escalated asset values…?” Greenspan went on, “We should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy.”*

And down the markets went for a time. 

Continue reading “Reality Bites”

Markets Prefer Certainty

Amidst the continuous stream of news and recent market fluctuations, a dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

Several factors are at work –

  • interest rates, per the US Fed
  • future government spending policy
  • rates of employment
  • market valuations

among other factors.

A dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

Continue reading “Markets Prefer Certainty”

Waiting Out the Storm (Not Dorian)

As pockets of US East Coasters sit working and waiting out the nearly inevitable temporary loss of power due to Hurricane Dorian, I cannot help but partially relate this “wait” to a comment made recently by one of the Federal Reserve Bank Presidents. Back in August Robert Kaplan said the following about US trade policy and the markets,

FedReserve

“When you have this amount of uncertainty and this frequency of changes, my reaction as a businessperson is not to speed up – it’s actually a little bit to slow down the cadence of it and maybe take a little bit more time.”* Continue reading “Waiting Out the Storm (Not Dorian)”

Is a Recession Coming?

Make no mistake: The media wants a recession.

How many of these items have you been bombarded about lately?

  • Inverted yield curve
  • Negative bond yields
  • Trade and Currency wars
  • “Fed Chairman Powell lacks clarity in his Q&A sessions” (talk about the ultimate throw under the bus)

A recession may or may not be coming soon. Recessions have been part of the US and global economies since the dawn of recording market data which dates to the 1920’s (with recessions dating back to the 1800’s).  Please see the accompanying chart that summarizes various scary events since 1970, several of which led to nasty recessions. Remember the Arab oil embargo?? The Dotcom bust?? Please also note the way the US stock market – which is based on a free market economy and the consumer – has recovered over time. Continue reading “Is a Recession Coming?”