Post Tagged with: "United States"

Yellen: The relationship between the slope of the yield curve and the business cycle may have changed

Yellen: The relationship between the slope of the yield curve and the business cycle may have changed

The biggest takeaway from Chair Yellen’s press conference was her belief that there is “reason to think the relationship between the slope of the yield curve and the business cycle may have changed.” To me, this suggests that some Fed officials will be inclined to disregard a flattening yield curve as a market signal. Some thoughts below

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Minsky’s financial instability hypothesis and the Fed’s reaction function

Minsky’s financial instability hypothesis and the Fed’s reaction function

As the Federal Reserve meets today to decide how to communicate its messaging on future rate hikes and balance sheet reduction, financial stability will play a key role. The risk of overheating was real. So let’s put some framing around this issue and ask how the Fed reacts as the data come in down the line.

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As the Fed meets, expect expansion through 2018, but problems thereafter

As the Fed meets, expect expansion through 2018, but problems thereafter

Given where we are right now, I think this expansion will continue through the end of 2018. And I want to talk about what that means in the context of my last post and recent BIS warnings on financial markets.

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Corporate tax cuts and monetary offset could mean recession

Corporate tax cuts and monetary offset could mean recession

Tax cuts in the US will accelerate the Fed’s timetable and increase the potential of curve inversion and eventual recession.

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Market jitters and fake liquidity in leveraged loans and high yield

Market jitters and fake liquidity in leveraged loans and high yield

With the US treasury yield curve flattening to almost 60 basis points between 2 and 10-year maturities, we need to ask where are the vulnerabilities in the market if this spate of good news ends. I believe we should look at high yield, leveraged loans and commercial real estate

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Why the flattening yield curve doesn’t worry me yet

Why the flattening yield curve doesn’t worry me yet

If you look at the yield curve since the early 80s double dip recession, what you’ll notice is that inversion – where 2-year rates exceed 10-year rates – precedes every recession. Right now, we’re still 70 basis points from inversion though. So far from expecting a slowdown or a recession, I would sooner expect economic acceleration. Let me go into detail below.

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No recession until at least late 2018

No recession until at least late 2018

The US economy added 261,000 jobs in October bringing the baseline unemployment rate down to 4.1%, the lowest in nearly two decades. And while this number was short of expectations, revisions to the prior two months’ data meant a net gain close to the consensus estimates. Going forward, the concern has to be that we are late in the cycle. So we need to think about how fiscal and monetary policy will develop.

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First piece of data that tells you the US economy is humming

First piece of data that tells you the US economy is humming

As we await the jobs number tomorrow, we should be fairly confident that the results will show an improving employment picture, especially in the wake of a hurricane plagued report last month.

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Let me tell you why I’m still worried before detailing the positive economic data

Let me tell you why I’m still worried before detailing the positive economic data

Yesterday I promised you to “look at individual economic data points and tell you why I think they bolster the case for optimism about the economic trajectory.” But before I get into that let me tell you why I still worry about the foundation of this global recovery. And a lot of it has to do with the pace of growth and with inequality. Let’s look at the US here.

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The global economy is hitting its stride right now

The global economy is hitting its stride right now

Most of the recent economic news from developed economies has been good. European growth, in particular, seems to have accelerated. Nothing I see in the economic data causes me worry. So I am cautiously optimistic that this upturn will last at least through 2018. So let me go through the data, my outlook and my concerns.

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Overbought

Overbought

“I had to cover my shorts.” That’s what my friend Matt told me after the company came out with its quarterly earnings and issued upbeat projections. I asked Matt, “how long are you going to keep shorting these companies. This is like the 10th time you’ve been forced to cover.” I don’t remember anymore how Matt responded. But I do […]

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The one data series you should follow to know if the US expansion is in good shape

The one data series you should follow to know if the US expansion is in good shape

Since we experienced a severe economic trauma due to the subprime financial crisis, there has been an almost reflexive disbelief in the durability this economic expansion. There are times when I would count myself amongst the disbelievers. For example, during the shale oil bust, I worried that Fed rate hikes would be the straw that broke the camel’s back. But […]

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