Stocks advanced sharply last week (S&P 500 +6.5%), largely reversing the decline of the prior week. The rally stemmed from a technically oversold condition and some evidence that inflation might be peaking. The best performers were consumer discretionary (+8.3%) and healthcare (+8.2%); the worst performers were energy (-1.6%) and materials (+2.7%). WEEKLY ECONOMICS SUMMARY There is developing evidence of a cyclical slowdown. Metals prices (eg, copper) are turning lower. PMI’s are falling… View More
Fear that U.S. has to experience a severe recession to get inflation under control is the ‘wrong lesson’ of history, the St. Louis Fed president says St. Louis Fed President James Bullard spoke in Barcelona. The U.S. economy should continue to grow in the coming several months, said St. Louis Fed President James Bullard on Monday, playing down fear of a severe recession that some economists and market pros view as inevitable in the face of the central bank’s war against too-hot inflation. … View More
US Energy Policy Failure It has been four months since Russia’s invasion of Ukraine. The White House’s failure to recognize that the Russian attack signified a need to focus on energy security over climate change has kept the price of energy elevated, raised recession risks, provided the funding for Putin’s military, reduced support for Ukraine, and eroded backing for Congressional Democrats. Now panic is setting in at the White House as the domestic political environment crumbles and Ru… View More
The FOMC raised the fed funds rate +75bp today, taking an aggressive step given the recent inflation & inflation expectations data. The Fed wants a restrictive policy by the end of the year (ie, above a neutral rate that’s believed to be in the mid-2% range) to help restore price stability. The plan is to raise rates (tighten financial conditions) until there’s clear evidence inflation is coming back down. There has been a lack of progress in recent months. The July meeting could see a… View More
All eyes will be on the results of the Federal Reserve meeting today when it announces how much it's going to raise short-term rates, its new projections for the economy and short-term rates for the next few years, as well as Chairman Powell's press conference. After the last meeting in May, Powell made it very clear the Fed anticipated raising rates by half a percentage point (50 basis points, or bps) at each of the next two meetings: this week's event and in July. When asked about a larger ra… View More