Do you feel more optimistic than a year ago? Despite more negative headlines and political turmoil, bond markets are signaling more optimism surrounding future growth than a year ago. Nominal yields around the world are much much lower than their historical averages. We actually see negative rates in some European nations. That being said, … Continue reading Discretionary Recessionary Signals
Valuations are stretched and economic data is cooling, yet markets are complacent. Why? The following are rationalizations of current market values. 1.) Massive movement from active management into passive strategies. Why pay someone to under-perform the S&P 500? Passive investing implies no trading, which means less volatility. 2.) Increased regulation has permanently caused a decline … Continue reading Why are Markets so Calm?
Bond markets and the Fed aren't making sense. The Fed ("Yellen") rose the Federal Funds Rate (FFR) last Wednesday, June 12th to a range of 1.00% to 1.25%. The Fed has two mandates: (1) to keep prices stable (i.e. keep inflation around 2%) and (2) to minimize unemployment. In other words, stabilize the economy by cooling … Continue reading Trouble in Yellen-Land