June 22, 2022 | Daily JAM, Morning Briefing, Videos |
My one-hundred-and-forty-eighth YouTube video “Ouch! The Fed Gets Honest About Inflation” went up today. In front of the Senate Finance Committee today, Fed chair Jerome Powell said that the Fed has all the tools it needs to fight inflation–except, he admitted, that nothing it does to raise interest rates will lower the price of gasoline or food. Those prices don’t figure into the core inflation rate the Fed watches, but they are very real to consumers. More money spent on food and fuel means less money available for everything else.
June 20, 2022 | Daily JAM, Videos |
My one-hundred-and-forty-seventh YouTube video “Rip the Band-Aid Off on Interest Rates” went up today. My Trend of the Week video this week looks at hedge fund gurus who have been yelling that the Federal Reserve needs even bigger interest rate increases than the 0.75% hike the central bank delivered on June 15. Most of these hedge fund managers are arguing their own book–since they’re short Treasuries–but that doesn’t mean they are wrong in their predictions for how high rates will need to go before we see inflation start to come down.
June 20, 2022 | Daily JAM, Dividend Income, PFXF, VGSH |
I’ve probably overstayed my welcome in the Vanguard Short-Term Treasury ETF (VGSH) and the VanEck Preferred Securities ex-Financials ETF (PFXF), but with the Federal Reserve accelerating its interest rate increases, I think selling these two members of my Dividend Portfolio is a bit more pressing right now.
June 15, 2022 | Daily JAM, Morning Briefing, You Might Have Missed |
The projections released by the Federal Reserve on Wednesday, June 15–the so-called Dot Plot–show a central bank that sees a tough 2022, especially on interest rates and inflation, but a definite improvement in 2024. This fits with the developing Wall Street narrative that sees inflation dropping in 2023 and 2024 and the Fed looking to cut interest rates in 2024.
June 15, 2022 | Daily JAM, Morning Briefing, Videos |
My one-hundred-and-forty-fifth YouTube video “Fed Hike Makes the Market Happy” went up today. The Federal Reserve raised interest rates by 75 basis points today–instead of the 50 points so widely expected just weeks ago–and stocks rallied. Here’s the Wall Street narrative that explains why.
June 14, 2022 | Daily JAM |
Stocks have spent two days in a vigorous sell off because of fears of higher interest rates and worries, after Friday’s surprise surge in CPI inflation to an 8.6% annual rate in May, that the Fed might decide to raise interest rates by 75 bass points rather than the expected 50 basis points at the Wednesday, June 15, meeting of its Open Market Committee. And now the actual 75 basis-point increase might produce a rally? Where’s the logic in that? The odds of a rally on a 75 basis point increase (and mind you, I still think 50 basis points is much more likely) rest on this emerging Wall Street narrative.
June 13, 2022 | Daily JAM, Special Reports |
It is different this time: Part 1 and Part 2 of my Special Report: Your Best Investment Strategy for the Next 5 Years. And finally the full Part 3 with strategies and picks for the 5-year period including the “out” years. It’s likely to “be different this time” for the next five years or so. And you need an investment strategy for that period.
June 13, 2022 | Daily JAM, Morning Briefing |
The latest Consumer Expectations survey (that is for May) from the New York Federal Reserve shows U.S. households’ anticipate inflation will rise at a 6.6% annual rate over the next year. That’s up from April expectations for a 6.3% rate. The May anticipated rate matches March results in the survey for the highest inflation anticipation on record.
June 12, 2022 | Daily JAM, Friday Trick or Trend |
At its March 16 meeting the Federal Reserve’s Dot Plot showed Fed officials forecasting that the Fed’s short-term interest rate, now set at 0.75% to 1.00%, would end 2022 at 1.9%. Things have changed since then with the Federal Reserve due to meet on Wednesday, June 15. There’s currently a fairly large divergence on interest rate expectations for the end of 2022.The June meeting and the new Federal Reserve Dot Plot showing the consensus forecast by Fed officials will go a long way to narrowing that divergence. But I don’t expect all disagreement to vanish from the markets on Wednesday. And I do expect that resolving this disagreement will present a bumpy road to the financial markets.
June 10, 2022 | Daily JAM |
The yield on the 10-year Treasury climbed 12 basis points today to 3.16%. The yield on the 30-year Treasury rose to 3.20% from 3.17% yesterday, June 9. The yield on the 5-year treasury reached 3.25%, up from 3.07% yesterday and above the yield on the 10-year maturity. The yield on the 2-year Treasury, which tends to be the most sensitive maturity to increases in the Federal Reserve’s short-term benchmark interest rate, climbed to 3.06% from 2.82% yesterday. In light of the 8.6% annual CPI inflation rate announced today, bond traders increased their bets on a 75 basis point interest rate hike from the Federal Reserve at both its June 15 meeting (that’s next Wednesday) and at the July 27 meeting.
June 9, 2022 | Daily JAM, Videos |
My one-hundred-and-forty-secondYouTube video “The Treasury Yield Tide Is Rising” went up today. Yields are up for 2-, 5-, and 10-year Treasuries. I’m also seeing higher expectations for more rate increases in the coming Fed meetings with the odds rising for a 75 basis point increase in July and/or September. I think these extreme bets on a 75 basis point increase have more to do with attitudes toward inflation than with actual belief in a 75-basis-point interest rate increase in those two months–that is that it will be tougher to bring it under control than the Federal Reserve now thinks. But these extreme positions are something to watch going forward. To one way of thinking they represent the chance for a rally in stocks if traders retreat from the 75-basis-point camp.
June 4, 2022 | Daily JAM |
Inflation isn’t solely a U.S. phenomenon. Which makes the Federal Reserve’s efforts to control inflation even harder. Inflation in the European Union hit a record 8.1% in May. The spread in the nineteen country group between the country with the lowest rate of inflation (Malta at 5.6%) and the highest (Estonia at 20.1%) also rose to the widest since . The gap between the highest and lowest inflation rates among the currency bloc’s 19 members has also jumped to its widest ever since the start of the euro in 1999. Meanwhile, inflation in Turkey hit a 23-year high of an annual 73.5% in May
