The good news first. The economy grew by 6.5% in the second quarter, which was one of the best quarters in recent memory. The bad news: it was a big miss. Economists were expecting an 8.4% rise, but the markets took it in stride. One explanation is that investors are well aware that the macroeconomic data is, at best, somewhat unreliable and prone to large revisions. It is not the government’s fault. The pandemic and subsequent reopening of the economy has made gathering economic data difficult. Another reason investors gave the miss a pass is that consumer spending, the biggest…
Insights & Advice
Tag: U.S. economy
Things are heating up
“Don’t touch me; I’m too hot! Y tu lo sabes!” —Usnavi, In the Heights Ouch! Inflation is heating up enough to burn my fingers. Some quick numbers, and then I’ll try to avoid any more percentages. (Emphasis on “try.”) The Labor Department reported that inflation in June 2021, as measured by the Consumer Price index (CPI), increased 5.4 percent, year-over-year. That is the highest 12-month rate since August 2008. For context, commodity prices were booming then; oil prices hit a record $150 per barrel. The so-called “core rate” was up 4.5 percent during that same time. The core rate excludes items…
Market bears are baffled
On a weekly basis, at least one of the main market averages hits another all-time high. But the bears continue to expect a correction. Will they ever be right? Sure, but playing for a pullback is a losing proposition most of the time. You may get it right eventually, but the opportunity cost of staying on the sidelines can be, well, costly, as the bears are discovering this month. A much better way to prepare for the inevitable next market correction is simply to reduce your risk by adjusting your portfolio. That might mean trimming back your more aggressive holdings…
What is causing the labor shortage?
There has been much conjecture, but little evidence, as to why the U.S. is experiencing a labor shortage. Some say it’s because people are lazy and are exploiting the system. Some say it’s because greedy employers aren’t paying enough. Many people have made up their minds about “why” there is a labor shortage before enough evidence has been gathered to support any hypothesis. I possess a third consideration, but I’ll try to stay out of that ideological dog fight and report the facts (and maybe a few opinions). If we are intellectually honest about it, we know that people have…
A week of surprises keeps investors hopping
There were plenty of reasons why the stock market was a bit jumpy this week. Let’s go through them. Two weeks ago, I wrote that I was worried “that we could suddenly see a spike in new Delta variant cases that impacts economic growth. Remember that less than half of all Americans are fully vaccinated. President Biden, his Chief Medical Advisor, Anthony Fauci, and the Fed are all sounding warnings over this risk, yet the markets are ignoring it.” Investors finally caught on this week and began to realize the risk presented by the Delta variant and its impact on…
We ain’t normal
After watching the catastrophe at the U.S. Capitol building last week, it’s clear to me that we ain’t normal. But that’s not the only way to measure our lack of normalness. According to the CNN Business “Back-to-Normal” index, we ain’t normal. The Back-to-Normal index represents how close the U.S. economy is to returning to its pre-pandemic level. As I write this column, the index tells us that the economy is operating at 75 percent of where it was in early March 2020. The index was hovering around 83 percent for most of October 2020. Since then, it has been trending downward….