facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

The Latest from Our Blog

The Strength of the United States Economy Continues to Surprise.

If you have ever been camping, you may have banked your campfire by covering the hot coals with ash. It’s a process that keeps the coals burning low so the fire can be easily rekindled. The U.S. Federal Reserve has been trying to bank the fire of U.S. economic growth – and it’s proving to be challenging. There are signs that U.S. economic activity is burning less brightly. For example, economic growth declined during the last two quarters, the U.S. housing market appears to be cooling, and consumer sentiment is low, reported Colby Smith of Financial Times. However, last week’s data suggested some parts of the economy are still ablaze. Unemployment fell to 3.5 percent, tying a five-decade low. The U.S. labor market was on fire in July, adding more than twice the number of jobs economists had expected, reported Jeffry Bartash of MarketWatch. The primary driver behind the gains was women returning to work, reported Catarina Saraiva and Maria Paula Mijares Torres of Bloomberg. The jobs number added fuel to the debate about whether the U.S. is in a recession. “The labor market in the first seven months of 2022 looks nothing like the labor market in most recessions. Friday’s jobs report was unambiguous. Far from losing steam, the labor market recovery has been firing on all cylinders,” wrote labor economist Julia Pollak in a Barron’s opinion piece.

Read More

Investors Thought They Heard a Dovish Note From the Federal Reserve and Markets Rallied.

Last week, we learned from the Bureau of Economic Analysis (BEA) that economic growth in the United States slowed for the second consecutive quarter. Economic growth is measured by gross domestic product, or GDP, which is the value of all goods and services produced during a specific period. GDP includes household, business and government spending, as well as exports and imports. Before inflation, the U.S. economy grew by 6.6 percent in the first quarter of 2022 and by 7.9 percent in the second quarter, according to the FRED Economic Data. After inflation, GDP shrank by 1.6 percent in the first quarter and by 0.9 percent in the second quarter. Is it a recession or isn’t it?

Read More

The First Six Months of 2022 Have Earned a Place in History Books.

2022 is likely to become part of the lore passed from generation to generation. Stories will be told about this bear market, as well as the remarkable political and social events that have occurred in the United States and elsewhere. Here is a brief look back at the last three months. Will the real inflation please stand up? Prices continued to rise during the second quarter, although there was a significant difference in inflation readings. The Consumer Price Index (CPI), which reflects price changes in cities, showed inflation was up 8.6 percent in May, year-over-year. The Personal Consumption Expenditures (PCE) Price Index (excluding food and energy) which measures price changes in urban and rural areas, showed inflation was up 6.3 percent for the same period. The Federal Reserve attacked inflation. The Federal Reserve’s inflation target is 2 percent. With inflation well above that level, the Fed began to tighten monetary policy aggressively. It ended its bond-buying program, began to shrink its balance sheet, and raised the fed funds rate by 1.50 percent year-to-date (with 1.25 percent of that increase coming in the second quarter). Bond rates rose. Bond rates moved higher during the quarter. Since bond prices move lower when bond ra

Read More

Last Week, Bad News Was Good News.

Consumers were feeling blue in June, according to the University of Michigan Consumer Sentiment Survey. The survey scored sentiment at 50, which was the lowest level on record. Surveys of Consumers Director Joanne Hsu reported that 79 percent of consumers anticipate business conditions will decline during the next 12 months, and almost half indicated they are spending less because of inflation. Consumer pessimism was reflected in the S&P Global Flash US Composite PMI™. The Index measured that manufacturing growth was at the lowest level in almost two years. “Declines in production and new sales were driven by weak client demand, as inflation, material shortages, and delivery delays led some customers to pause or lower their purchases of goods,” reported S&P Global. The Index was at 52.4. Any reading above 50 indicates growth. Unhappy consumers and slower growth in manufacturing made investors very happy. Consumer spending drives the economy. So, if consumers begin to spend less and economic growth slows, then the Federal Reserve may slow its rate hikes or raise rates by less. Last week Fed Chair Jerome Powell told Congress:

Read More

The Fight Against Inflation Intensified.

Last week, the Federal Reserve (Fed) delivered a message that it is serious about fighting inflation. The Federal Open Market Committee (FOMC) lifted the federal fund's target rate by 0.75 percentage points. The fed funds rate is now 1.50 percent to 1.75 percent. The Fed also has begun to shrink its $9 trillion balance sheet by selling Treasury securities and agency mortgage-backed securities, a process known as quantitative tightening (QT), reported Kate Duguid, Colby Smith, and Tommy Stubbington of Financial Times (FT). The Fed’s balance sheet expanded greatly during the past few years as it engaged in quantitative easing (QE). QE entailed buying Treasury and agency securities to ease financial conditions, strengthen the economy, and support markets during the pandemic.

Read More

Inflation Is Proving to be Far More Tenacious Than Markets Had Hoped.

The idea that inflation peaked in March was put to rest last week when the Consumer Price Index (CPI) showed that inflation accelerated in May. Overall, prices were up 8.6 percent last month, an increase from April’s 8.3 percent. It was the highest inflation reading we’ve seen since December 1981. The most significant price increases were in energy (+34.6%) and food (+10.1%). That’s unfortunate because the War in Ukraine significantly influences food and energy prices right now, and no one knows how long it will last. In April, the World Bank’s Commodity Markets Outlook reported: “The war in Ukraine has been a major shock to global commodity markets. The supply of several commodities has been disrupted, leading to sharply higher prices, particularly for energy [natural gas, coal, crude oil], fertilizers, and some grains [wheat, barley, and corn].”

Read More