As of the close today, Tuesday, March 22, Treasuries had sold off steeply raising the yield on the 10-year Treasury to 2.38%, a huge (for the Treasury bond market) 9 basis points. The rout took the yield on the 2-year Treasury to 2.16%. On Friday,March 18, the 2-year Treasury yielded 1.94%. The bond market is taking yesterday’s comment/promise/threat from Fed chair Jerome Powell seriously
A Recession is coming! Probably.The odds are now high enough so that you and your portfolio should pay attention. So there are really three important questions. First, how likely is a Recession?In this Special Report I’m going to lay out the reasons for thinking that a Recession is on the way. Probably in the second half of 2022 or in 2023. Second, what strategies should you, as an investor, use to navigate in your portfolio through a Recession? In this Special Report I’m going to explain three strategies–call them general rules of the road–for investing during (and after) a Recession.
And, third, what specific stocks or bonds or ETFs or options should you use to implement those strategies to give you the biggest investing edge possible during this Recession? That’s where the 10 Recession Stock Picks come in. Look for that post tomorrow, March 22.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My one-hundredth-and thirteenth YouTube video “The Fed gets depressed” went up today. Happy spring! But not for the Fed. In the meeting today, the Federal Reserve raised interest rates by 25 basis points, which was almost universally expected. The market hasn’t moved much in response. However, I’m looking at the Dot Plot projections from Fed officials issued today with lowered expectations for GDP growth in 2022, as well as higher expectations for inflation. In this video I break down what that could mean as we look at the Treasury yield curve and the chances of a coming recession.ke to take advantage of changing and volatile yields.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My one-hundredth-and twelfth YouTube video “Trend of the Week: Central banks tighten faster than expected” went up today. This week I’m looking at tightening by central banks, including the Fed. I think that some of us expected that with the invasion of Ukraine, banks would pump the brakes on raising interest rates and reducing their stimulus. With its announcement last week that it would accelerate the reduction of bond buying, the European Central Bank sent the opposite signal, and that makes me think that the Fed will stay the course to raise rates as well when it reports this Wednesday. I look at the volatility in the treasury market and talk about some moves you can make to take advantage of changing and volatile yields.
The U.S. central bank meets this week and is widely expected to raise its benchmark interest rate by 25 basis points to range of 0.25% to 0.50% from the current target range of 0%to 0.25%. That move would signal the start of a cycle The Russian invasion of Ukraine has pretty much taken the possibility of a 50 basis point interest rate increase off the table–too much economic risk at a time when everything is no uncertain–and that has left the consensus firmly anchored at 25 basis points. Which has taken almost all the drama out of the Wednesday, March 16, meeting of the Fed’s Open Market Committee. Almost.
Economists surveyed by Bloomberg had projected that inflation, as measured by the Consumer Price Index, would jump to a 7.9% annual rate for February. And that’s exactly what the Labor Department reported today, March 10. That’s a jump from the 7.5% annual rate in January. And it is the fastest annual rate of inflation in 40 years.
Consternation isn’t an investment strategy. Although I certainly understand that reaction to current stock market moves. The day to day volatility is that extreme. But if we focus on that volatility and on how confusing this market is, I think we’re in danger of overlooking the investable trends (up and down) in this market. So let me try, please remember that this is a work in progress and subject to revision, to tease out some of the longer trends that will drive stock prices in the medium term.
The U.S. economy added 678,000 new jobs in February. That was the most new jobs since July. Economists surveyed by Bloomberg had expected the economy to add 423,000 jobs in the month. The official unemployment rate fell to 3.8%. Average hours earnings, however, lagged
In as straight forward a statement as the Federal Reserve can make, Fed chair Jerome Powell said the U.S. central bank will start a new cycle of higher interest rates with a 25 basis point increase on March 16. (It takes 100 basis points to make one percentage point.)
As everyone expects, the Fed will raise interest rates at its March 16 meeting. And signal that more increases are to come.But the case is very different for the Fed’s announced plans to end in March its purchases of Treasuries and mortgage-backed assets (the program call Quantitive Easing that was designed to stimulate the economy) and plans to start shrinking its balance sheet by not buying new bonds as holdings in its portfolio mature. Now, I think, the war of financial sanctions that has become a crucial battlefield after Russia’s invasion of Ukraine says that maybe this is exactly the wrong time to take liquidity out of global financial markets.
The Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, rose at a year over year 6.1% rate in January. That tops the 5.8% annual rate in December. Economists had been projecting a 6% increase for January.
I know it’s easy to forget that there’s other market moving news on the horizon (besides what the next day will bring in the Russian invasion of Ukraine) but tomorrow, Friday, February 25, the government will report the Personal Consumption Expenditures (PCE) price index, the inflation index that the Federal Reserve uses, for January. That measure is projected to show inflation rising at an annual rate of 6% in January, according to economists surveyed by Bloomberg. The core rate, which excludes food and fuels, is forecast to climb to an annualized 5.2%. The PCE index was up 5.8% year over year in December. The core rate was up 4.9% year over year in December.
