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While US large caps have also struggled lately, they’ve fared far better than their smaller counterparts. Over the past year, much of the Russell 1000’s outperformance is attributable to its bigger exposures to technology and consumer discretionary industries. The sm...
The positive result for the AIER Leading Indicators Index suggests continued economic expansion with the potential for a broadening of growth in the economy. Ongoing disruptions to labor supply and production, rising costs and shortages of materials, and logistics and transportation b...
AIER’s Everyday Price rose 1.0 percent in January after being unchanged in December. Gains were once again broad based in January with 18 of the 24 components making a positive contribution for the month. Price pressures for many goods and services in the economy remain ele...
With inflation rising, fears that policymakers could tip economies into recession have eroded enthusiasm for stocks after three strong years. In this environment, equity investors must distinguish between businesses that are more likely to do well in an inflationary environment and th...
There is one huge thing that is missing in all the buzz about inflation: the surging M2 money supply. As real rates move higher, the demand for money becomes intense, liquidity becomes scarce, and marginal firms get squeezed. Swap spreads are a highly liquid indicator of general l...
My own opinion was that we would likely see a 20%-25% correction in the S&P 500 at some point in 2022 thanks to the pending removal of all the excess liquidity that Jay Powell is now forced to deal with. However much of the negative sentiment you see and hear today are investors w...
There’s an important disconnect between stocks and bonds today. Specially, I am looking at two fundamental indicators for evaluating long-term interest rates. The first is the performance of small cap stocks relative to large caps. Typically, this ratio has moved in concert wit...
In light of the December FOMC meeting minutes, we should expect modest increases in the federal funds target soon, with a reduction of the balance sheet following the increase in rates. The exact timing of balance sheet reduction is yet to be determined. The shift in tone reflects the...
Investors all talk about risk, but there seems to be little consensus on what it is, how it should be measured, and how it plays out in the short and long term. In this post, I will start with a working definition of risk that we can get some degree of agreement about, and then look a...
Demand above supply is causing shortages. But higher prices reduce quantity demanded and increase quantity supplied, until the two are equal. Why isn’t that happening today? Aside from markets with continuous trading for uniform commodities, price adjustment will always take ti...