Economy and the Market: The Fed funds rate was increased by 75 “basis points” or “bps” or 0.75%. For reference, 100 “basis points” = 1.00%. Until recently, the expectation of the Fed funds rate increase was 0.50% or 50 basis points. The recent CPI/inflation increase announced last week moved the expectations for the Fed funds increase to 0.75%. The rise in expectations for the increase was part of the reason for the stock market sell-off...
According to the economic decision-makers, two quarters in a row of negative GDP growth results in a recession being called. This would be a lot sooner than economists have been anticipating. The Federal Reserve has an indicator called GDPNow: “follows economic data in real-time and uses it to project the way the economy is heading. Tuesday’s data, combined with other recent releases, resulted in the model downgrading what had been an estimate of 1.3% growth...
We had a stock market bounce back last week with a bounce off the intraday bottom in the SP 500 of a 20% decline defined as a bear market. The bond market stabilized last week with 10-year yields below 3%, a recent high. Mortgage rates moved down slightly from their highs for 30-year mortgages of close to 6%. Not surprisingly, mortgage refinancing has slowed down very quickly. Will housing prices follow? So far no, as...
SAS Managed Account Client Action item: A reminder that Charles Schwab acquired TD Ameritrade back in 2019. The best way to prepare for the merger is to ensure that you have a userID, online access to all of your SAS managed accounts held at TD Ameritrade, and have the most up to date e-Delivery (electronic delivery) settings for your account statements. Login here: www.advisorclient.com First time registration here: https://www.advisorclient.com/login/getstarted Update or confirm your e-delivery (electronic...
SAS Managed Account Client Action item: A reminder that Charles Schwab acquired TD Ameritrade back in 2019. The best way to prepare for the merger is to ensure that you have a userID, online access to all of your SAS managed accounts held at TD Ameritrade, and have the most up to date e-Delivery (electronic delivery) settings for your account statements. Login here: www.advisorclient.com First time registration here: https://www.advisorclient.com/login/getstarted Update or confirm your e-delivery (electronic...
The Federal Reserve made good on the pledge to increase the Fed Funds rate by ½%. The day of the announcement and before the press conference, the equity markets were down. The Fed announcement came and markets continued lower. During the press conference with Fed Chairman Powell, he stated that there are no plans to increase rates faster than ½ point going forward. This caused an unprecedented rally in the equity markets with the Dow gaining over 1000 points and the Nasdaq increasing by 5%.
Volatility continues with sporadic gains of over 1% followed by 2% losses. The panoply of concerns always seems endless at times like this. Memories can be short, a human bias called recency bias. March 2020, merely 2 years and 2 months ago, we experienced our last recession we over a 30% decline in market averages. Streets were empty, stores were closed, offices closed.
Last week the US Labor Department announced that price increases year over year were 8.5% meeting expectations by analysts. This is the most rapid increase in inflation in 40 years. Forty years ago, some of you were not born yet or were so young that you wouldn’t remember the impacts of high inflation.
On a walk with my wife this past week I turned to her and said, “remember the earlier days of Covid?” Days and days in a row when we stayed home, didn’t see any friends in person, walked endlessly, and stayed away from crowds? An ironic sort of nostalgia set in for the earlier days of the pandemic with little on the agenda.
While the pandemic is waning, one in three Americans worry about contracting Covid especially in light of any and all new variants, down from 50% late in 2021. At the same time, inflation is causing rising costs and converging with the lower savings rates, meaning an uptick in a return to jobs. This trend began in September 2021 and continues to increase.
Last week the stock market had the biggest rally since the pandemic bear market beginning in March 2020. Only after large market moves is it “easy” to determine why such market moves actually happened. Hindsight analysts always look smart! Going forward, predictions are all over the map, but the consensus for GDP growth for 2022 is still 3.6%, indicating strong economic growth. 2023 is still in the range of 2.5% toward the higher end of growth over the last 10 years.
This week, the Federal Reserve raised the Fed Funds rate from 0-.25% to .25-.50%. This raise has been promised since the end of last year. It is not a surprise and is probably the first of a number of rate increases this year. The Fed has raised its expectation for inflation this year only to over 4% with lower expectations to 2.6% for 2023, above the Fed goal of 2%.
