Short Term

Please watch my new YouTube video: Beware the Dot Plot

Please watch my new YouTube video: Beware the Dot Plot

My one-hundredth-and-thirty-ninth YouTube video “Beware the Dot Plot” went up today. The next Fed meeting is June 15, and I think there isn’t much to worry about in terms of a coming rate increase (we know it will be 50 basis points, which the market has priced in). What you do need to look out for, however, is the Dot Plot. This communicates Fed members’ expectations for growth and inflation in the coming years, and if they foresee stickier inflation AND slower economic growth, the market won’t be happy.

Treasury yields toy with 3% ahead of Wednesday Fed meeting

Treasury yields toy with 3% ahead of Wednesday Fed meeting

Economists surveyed by Bloomberg project the Federal Reserve will hike its benchmark short-term interest rate by 50 basis points on Wednesday in an effort to damp inflation. And bond traders have just decided that the U.S.central bank will raise rates by 75 basis points at its June 15 meeting. The CME Fed Watch Tool, which uses prices in the Fed Funds Futures market to calculate odds of a fed move, puts the odds of a 50 basis point increase from the current 0.25% to 0.50% to 0.50 to 0.75% at 99.8%. That tool puts the odds of a 75 basis point increase air the June 15 meeting at 87%. That’s up from odds for just 18% on April 1. Bond prices are down and bond yields are up today.

The U.S. economy shrank at a 1.4% rate in the first quarter; stocks surge

The U.S. economy shrank at a 1.4% rate in the first quarter; stocks surge

The U.S. economy unexpectedly shrank at a 1.4% annualized rate in the first quarter of 2022, the Bureau of Economic Analysis reported Thursday, April 28. The first quarter results follow on a 6.9% rate in the fourth quarter. Economists had projected a 1% tate of growth for the quarter. But since Wall Street was already expecting a big slowdown in growth for the quarter and because a peek below the headline numbers argued that the lower growth rate would be temporary, stocks surged on Thursday.

China tries old play book to stimulate economy

China tries old play book to stimulate economy

China’s President Xi Jinping has vowed to boost China’s economy, struggling under the impact of widespread Covid-19 lockdowns and a collapse in the property development sector, by pushing more infrastructure spending into the economy. This has been China’s tried and true first response to faltering growth. But this time it seems unlikely to work.

Fears of new Covid lockdown in Beijing send stocks reeling

Fears of new Covid lockdown in Beijing send stocks reeling

China expanded coronavirus testing to most of Beijing as rising cases fuel fears about an unprecedented lockdown of the capital. Officials on Monday night said testing would take place in another 11 of Beijing’s 16 districts, moving beyond just Chaoyang, where most of the infections have been detected since Friday. The city of more than 20 million people has already locked down parts of the eastern district of Chaoyang, home to 3.5 million people, with plans to ease restrictions after residents complete a testing regimen on April 27. The bad news from Beijing added to new bad news from a locked down Shanghai

Saturday Night Quarterback says, For the week ahead expect…

Saturday Night Quarterback says, For the week ahead expect…

Big banks will kick off another earnings season beginning with JPMorgan Chase (JPM) on Wednesday, April 13. Citigroup (C) and Wells Fargo (WFC) follow on April 14. Bank of America (BAC) reports on April 18. Bank earnings forecasts present a complicated picture for the quarter–which is only appropriate since that’s true of Standard & Poor’s 500 earnings forecasts as a whole.