September 14, 2022 | Daily JAM, Videos |
My one-hundred-and-seventy-fifth YouTube video: “The Fed’s Real Inflation Problem” went up today. The CPI numbers came out and they were disappointing with Inflation running at an 8.3% annual rate in August. But the inflation problem is worst than the headline numbers indicate. Shelter, the single biggest component of the CPI inflation rate, was up by the most in August since 1991. And the Federal Reserve has very little ability to lower a runaway inflation rate in rents using its usual methods of raising interest rates and curbing growth in the money supply. That means the process of controlling inflation is going to be slow and difficult.
September 14, 2022 | Daily JAM, Morning Briefing |
Investors and traders have decided not to panic today. Which certainly wasn’t the case yesterday. I’ll leave it to you to decide if a 5.54% drop in the NASDAQ 100 is a measured reaction to inflation running 20 basis points hotter than projected. (Amazon (AMZN) fell 3.06%, Apple (AAPL) was down 5.87%, Applied Materials (AMAT) was lower by 6.14%, and Nvidia (NVDA) plunged 9.47%.) But I sure caught a whiff of panic in Wall Street calls for the Federal Reserve to raise interest rates by a full 1.00%–and not the widely anticipated–0.75% at the September 21 meeting of the Open Market Committee.
September 9, 2022 | Daily JAM, Morning Briefing |
According to the CME Fed Watch Tool, which calculates the odds of a Fed move in interest rates by looking at prices in the Fed Funds Futures market, the odds of a 75 basis point interest rate increase by the Federal Reserve at its September 21 meeting have climbed to 90%. The odds were 87% yesterday and just 68% a month ago on August 9.
And what does the market expect after that? 50 basis points higher at the November 2 meeting (83% odds) and 66.5% odds that interest rates will finish the year at 3.75 to 4.00% after the December 14 meeting. After that though, the picture gets murky. And that murkiness is the reason, in my opinion, for another Bear market rally to end 2022.
September 9, 2022 | Daily JAM |
Add Federal Reserve Bank of St. Louis President James Bullard and Fed governor to the list of those Fed voters speaking in favor of a 75-basis-point interest rate increase at the Federal Reserve’s September 21 meeting.
September 8, 2022 | Daily JAM |
I think investors and, more especially traders, should be looking for another Bear market rally to begin after the Federal Reserve’s September 21 meeting. How confident am I on this call? Nothing is ever guaranteed in the financial markets, of course, but I’d give this scenario better than 75% odds of being correct. Here’s the setup behind this call and why I’m so confident.
September 7, 2022 | Daily JAM |
Yesterday Richmond Federal Reserve President Thomas Barkin told The Financial Times that interest rates must stay high until inflation improves. 4% interest rates wouldn’t surprise him, he said.
September 5, 2022 | Daily JAM, Special Reports |
Today, September 5, I’ve gone back through this Special Report to update any parts of my calendar in light of what we’ve learned about the economy, about Federal Reserve interest rate policy, and about the global economy in the last few weeks. This update includes my take on the August jobs report and on recent Fed-speak from the Jackson Hole conference and after. It is different this time. And it’s likely to “be different this time” for the next five years or so. And you need an investment strategy for that period.
September 2, 2022 | Daily JAM |
This morning the financial markets had convinced themselves that the slight rise in the unemployment rate to 3.7% and the relatively modest addition of 310,000 jobs in August would lead the Federal Reserve to moderate its interest rate increase at its September 21 meeting to a hike of just 50 basis points instead of 75. By the close, however, the market was having second thoughts.
September 2, 2022 | Daily JAM, Morning Briefing |
The U.S. economy added 315,000 jobs in August. Economists had projected that the economy would add 300,000 jobs. The unemployment rate rose to 3.7% from 3.5% as more workers entered the workforce. The labor participation rate rose in August to 62.4 $ from 62.1% in July. That’s till 1 percentage point below the labor force participation rate in February 2020, before the Pandemic. That took the official unemployment rate up to 3.7% from 3.5% in August. Out-of-the-box financial markets saw these numbers as likely to convince the Federal Reserve to raise interest rates by just 50 basis points at its September 21 meeting instead of the 75 basis points expected by the majority of investors before today’s data. In early trading the Standard & Poor’s 500 was up by as much as 1.3%.
August 31, 2022 | Daily JAM, Morning Briefing |
The stock market still hasn’t completely accepted the likelihood of a recession forced by the Federal Reserve’s interest rate increases. And there’s still optimism about interest rate cuts in the second half of 2023. But I sense that the market consensus is moving on from the hopes for a soft landing–where higher interest rates slow the economy and whip inflation without causing a recession–to what Bloomberg today called a “growth recession.”
August 31, 2022 | Daily JAM, Morning Briefing |
With all due apologies to T.S. Eliot, when it comes to stocks, April isn’t the cruelest month. That title goes, hands down, to September. Which my calendar says starts tomorrow. September is, on average, the worst-performing month for stocks
August 30, 2022 | Daily JAM, Morning Briefing |
Today’s JOLTS report–Job Openings and Labor Turnover Survey–from the Department of Labor showed the number of available jobs climbing in July to 11.2 million. That’s up from a revised 11 million openings in June. Economists had expected a decline in the number of job openings to 10.4 million for the month. The surprising increase in job openings shows that the labor market continues to be extremely tight. The Federal Reserve has tagged labor market conditions as a key indicator that it is watching as it sets interest rates.
