Daily Reckoning – Stockman: This Bond Market is One Giant Bubble When asked what his view on a Congressional budget deal is and what it could mean for jobs and the economy Stockman relayed, “There will be panic in the financial markets. This is not priced in. The market isn’t expecting anything. I think it… Continue reading David Stockman Returns With More Doom & Gloom
The Wall Street Journal – Greg Ip: Robots Aren’t Destroying Enough Jobs From Silicon Valley to Davos, pundits have been warning that millions of individuals will be thrown out of work by the rapid advance of automation and artificial intelligence. As economic forecasts go, this idea of a robot apocalypse is certainly chilling. It’s… Continue reading The Robot Takeover & Productivity
Handout, mp3 replay and webcast replay for our conference call titled Understanding The Fed’s Balance Sheet on May 11, 2017. The handout can be found here (starts with the second post). Mp3 replay can be heard below: Your browser does not support the audio element. Webcast replay below:
When looking at the chart above, remember the Fed already hiked once this year. So when the green line above shows an expectation of 2.6 hikes this year, that is 1.6 more hikes by year-end. Duy mentions pressure is building on the Fed in the story below, but that pressure is not… Continue reading What Is Expected From The Fed?
As the chart above shows, the Fed’s balance sheet has held steady around $4.4 trillion over the past few years due to the Fed’s reinvestment in new bonds once old bonds mature. Now that the topic of reducing the balance sheet has become more prominent, we wanted to take a look at the effect… Continue reading How The Fed’s Balance Sheet Matters
The chart below shows the target fed funds rate with tightening cycles shaded in gray. Two things make this tightening campaign unique. The first is the year-long lag between the first and second rate hikes in the campaign. The second, related to the first, is that the target fed funds rate has increased… Continue reading Market Responses To Tightenings
If it feels like Federal Reserve members are speaking more, that’s because they are.Federal Open Market Committee participants have consistently delivered more speeches each year since the mid-1990s, according to Deutsche Bank’s chief international economist, Torsten Slok. In 2017, committee participants are on pace to give a record-high 14 speeches per member, versus four in… Continue reading The Fed Focuses On The Short-Term And Models
The chart below shows expectations using economic growth data for balance sheet reduction. Our own estimates are in orange and the Federal Reserve’s are in red. We use changes in major economic data releases to forecast the level of the balance sheet trained on data from 2009 to current. Current economic growth indicates total assets… Continue reading Central Bank Balance Sheet Alters Equity Markets’ Response to Economic Growth
Last week we showed how the size of the Federal Reserve’s balance sheet could be converted into basis point hikes or cuts. We concluded that the Fed’s bloated balance sheet, combined with a nominal funds rate of 0.75%, pushes the “accomodative funds rate” to -1.73%. Below we take our analysis one step further by examining global central… Continue reading Central Bank Balance Sheets Dictating Magnitude of Returns
Yesterday we provided estimates for how quickly the Federal Reserve will reduce its balance sheet along with its impact on U.S. equities (see here). Today we focus on the total assets of the Federal Reserve, ECB, BOJ, and PBOC, which have all converged to roughly $4.5T for a total of $18.3T. The blue line in… Continue reading Sovereigns Becoming Increasingly Attached to Central Bank Balance Sheets
“Duration has never been this long in my career,” says Jeffrey Gundlach, the chief executive of Los Angeles-based asset manager DoubleLine Capital. “With rates near the lowest levels ever and duration at literally the highest level ever, it is the worst possible set-up versus history. You are [taking] more risk and getting less reward.”… Continue reading High Duration