Folks in New England are sick of the last month of weather. It’s been a rainy season, for sure. But a new season is about to start for the stock market. When it comes to stock market seasonality, the worst few months are ahead of us. “Seasonality” refers to the tendency of the stock market to perform certain ways throughout the year. Ever hear the phrase, “Sell in May and go away?” That saying is attributed to seasonality. According to Renaissance Macro Research, since 1928, the return of the S&P 500 from July 27 until October 27 has averaged a…
Insights & Advice
Tag: the Fed
High risk, high reward?
Inflation has been high, based on the Consumer Price Index, or CPI. The Bureau of Labor Statistics reported that the CPI was up 0.6 percent in May 2021 and rose 5 percent over the previous 12 months. Both are big numbers and well above historical trends. The Federal Reserve has repeatedly said that the high inflation is “transitory.” Others expect high inflation to continue unabated. I don’t understand why people argue either/or. I suspect some forces will push inflation consistently higher but not to a ruinous level. (I do believe that continuing at a 5 percent rate would be ruinous.) Let’s…
Fed puts markets on notice while crypto crashes
It had to happen at some point with economic growth spiking as high as it has, and inflation beginning to creep up. Investors should have expected the Fed to think about a change in policy. This week, we had our first mention of the dreaded “T” word. T is for taper and in the minutes of the Fed’s April FOMC meeting released on Wednesday, the entire financial community jumped on just one phrase: “it might be appropriate at some point” to consider tapering asset purchases if the economy shows “rapid progress.” In other words, the Fed is signaling that they…
The coming economic boom
The nation should have a lot to celebrate in the coming months. Most economists are busily raising their forecasts for growth for the remainder of the year. If their forecasts are accurate, Americans can expect a booming economy this year and into 2022. The arguments for growth are straightforward. The number of Americans that are being vaccinated is now higher than the number of new coronavirus cases. By the end of May 2021, if government forecasts are correct, almost everyone in the U.S. that wants a vaccination should have one. As a result, we can expect to see a re-opening…
Is the stock market in a bubble?
According to a recent E-Trade survey, millionaire investors believe the U.S. stock market is in a bubble (or at least near one). The survey results from investors with at least $1 million of investable assets were: 16 percent say the stock market is “fully in a bubble” 46 percent say it is “somewhat of a bubble” 29 percent say the market is “approaching” a bubble 9 percent say it is “nowhere near” a bubble More than half of the millionaire-class believe the U.S. stock market is at least in “somewhat of a bubble.” They may be right, just accidentally, but are they…
The Reflation Trade
Over the past six months, an increasing number of investors have come to believe that a rise in the inflation rate is inevitable. That appears to be a sound bet from where I sit, even though the present data doesn’t support that wager. The argument for increased inflation centers around money. The world is awash in the stuff. Central banks have been printing money for years to stimulate their economies. Last year’s pandemic only opened the monetary flood gates even further. And the trend is not over. During the next few months, here in the U.S., the Biden Administration is…
Investors face a roller coaster ride
Volatility returned to the stock market this week as the level of uncertainty increased on several fronts. Unfortunately, there won’t be any definitive answers to what concerns investors for at least two months. It is September, after all, and this month is notorious for inflicting pain on investors. Historically, October is not much better, and in a presidential election year it can be worse. While the financial media will provide their thoughts on just why stocks drop or rise on any given day, it is not much use to you. The real reason for “why” will only be known after…
The Fed’s policy shift
Dalton — Investing in stocks just got more attractive because of a policy shift announced by the Federal Reserve’s Federal Open Market Committee on Aug. 27. Details are found in the Federal Reserve’s statement of longer-run goals and monetary strategy. That statement was initially presented in 2012, but as Fed Chair Jerome Powell put it, “since the economy is always evolving, the FOMC’s strategy for achieving its goals, or policy framework, must adapt to meet the new challenges that arise.” The gist of it is that the Fed will move from targeting an inflation rate of 2 percent to targeting an average of…
Markets reach for the sky
Credit the Fed for this week’s bump up in the averages. Technology shares led the charge as usual, shrugging off a sinking economy, higher unemployment, and no progress on another bail out. What else is new? At the annual Jackson Hole Symposium of world central bank leaders, conducted virtually this year, Jerome Powell, the chairman of our central bank, took center stage. In his prepared remarks, Powell announced a shift in the U.S. inflation policy. Rather than using the oft-stated, long-held inflation target of 2%, the Fed will now “seek to achieve inflation that averages 2% over time.” What’s the…
Column uncertainty
Dalton — On Friday, July 31, the additional $600 in weekly federal unemployment benefits, which were part of the CARES Act, expired. A few days before that, I wrote about how, according to www.policyuncertainty.com, economic policy uncertainty was “through the roof.” Well, political risk is leading to column uncertainty. Specifically, I am uncertain whether between the time I submit this column and the time your eyes find it, if Congress might have written a passable fiscal stimulus deal for the White House to approve. Congress typically recesses for the month of August (that’s not a typo). However, on Saturday, Aug. 1, they…