Comment The slide, Page Three, shows you the pace of the Fed rate hikes right now, and there they all are starting on day one. And the big, thick blue line right now is where we are after the third rate hike. It’s one of the slowest ever. The ’86 rate hike campaign was slower,… Continue reading Among The Slowest Hiking Campaign Ever
Comment About Stan Fischer’s argument that there are going to be three rate hikes this year, again, I think that the Market is the way that you could go. You could hire an expensive consultant, or you can just look at the Market and it gives you kind of the same answer. This chart here,… Continue reading Market Says 1.4 More Rate Hikes This Year
Comment What is interesting about this is that Yellen, in her March presser, talked about this. She said that they’ve been raising rates. She said that they are still accommodative but they’re not that accommodative, and this is Fedspeak for the following, which we could find on Slide Six. Here, I spliced together all of… Continue reading The Fed Says 3% Is Neutral
Comment Slide Four, bottom of Page Two on the handout is the odds of a Fed rate hike at the June Meeting. I will remind you that we think that Fed watching is the easiest thing – and I don’t want to use third person, so I’ll use first person – I think that Fed… Continue reading Probability Of A June Hike
Comment But, again, as we have been arguing, they’re forgetting something, and that’s on Slide Seven. They’re forgetting the Fed’s Balance Sheet. This matters and this has to matter in some way. In her presser, Yellen kind of tried to compartmentalize these things. There are the rates hikes and what we’re going to do with… Continue reading What Does This Mean?
Comment So, if we go to the chart on Slide 11, the blue line on this chart is the actual Funds Rate, and I’m using the high end at 1%. The red line on this chart is the Taylor rule, which is at 3.65 right now. That’s where the Taylor rule says neutral should be… Continue reading How Easy Is The Fed?
Comment Here is the S&P’s total return during the tightening campaign. And you can see the blue line at December 15, at 13% is, far and away, the highest we’ve been after 320 days. So what you see is that the Market has performed the best, or made Edson Gould’s old argument “three steps and… Continue reading S&P 500 Returns During Tightening Campaigns
Comment And then, here, the Slide 18 shows you how the 10-year has performed relative to the other rate hike campaigns back to May of ’83. The bar is the range of returns you had over that period. The dot is the absolute total return. And then the bottom chart just shows you at an… Continue reading US 10yr Total Returns During Tightening Campaigns
Comment So if you look at the chart on Slide 14, this shows you the rate hike campaign since 1983. And what we did here is a scatter graph. The annualized S&P return for the rate hike campaign and the Taylor rule. And given the amount of accommodation in the Taylor rule, where would we… Continue reading Excessively Accommodative Policy, Low Inflation And Unemployment Contributing to S&P 500 Performance
Comment And then the slide on 22 – this is the Z score for the two, five, 10, and 30 on the net-large speculator position. Now, if your eyes glazed over on what I just said, we averaged the two-, five-, 10-, and 30-year futures – large speculator position, Z score. “Z score” means how… Continue reading Speculators Still Leaning Heavily Bearish
Comment Slide 21 – this is the “but” – the “but” is that I’ve argued that we’re probably going to be at 2.25 if not lower on the 10-year yield, and everybody that is nodding their heads, “Yes, we’re going to 3% in 2018” gets their faces ripped off first because everybody’s positioned for it… Continue reading Philly Fed 10-Year Interest Rate Forecasts
Comment But I do want to talk a little bit more about the stock-bond relationship. So the top chart here – you’re looking at Slide 19, the top of Page 10 – is the S&P 500 log going back 70 years, the end of World War II. The red line is the 10-year yield, weekly,… Continue reading The Stock Bond Relationship