by Bill | Jan 20, 2017 | Uncategorized, US Economy
S&P 500 returns are positively correlated to the Citigroup Economic Surprise Index. The Surprise Index leads the S&P 500 by about two months, as you can see from the chart on the left. Normally, low levels in the index are a good time to buy. When the...
by Bill | Jan 6, 2017 | US Economy
Financials have been the biggest winners since the Trump election The S&P Bank ETF KBE has rallied 29% since the election. We’ve written about financials over the past few weeks, but it is worth highlighting again. While we may see financials rally in the short...
by Bill | Dec 2, 2016 | US Economy
Higher US yields are already leading to higher mortgage rates in the US. Building permits are one fo the best leading indicators for housing, and mortgage rates themselves lead building permits. The next chart shows the modest recovery in building permits is likely...
by Bill | Nov 28, 2016 | US Economy
(from our Tactical of November 8th 2016) Bond yields have been rising in most countries, and yield curves have steepened across the developed world. As the top chart shows, the rise in nominal yields has come from a rise in inflation breakevens, while real yields...
by Bill | Nov 12, 2016 | US Economy
(from our Tactical report of 1st November 2016) Equity volatility and credit spreads are almost perfectly correlated. In part this is because equity is a perpetual option on the solvency of a firm. When credit becomes stressed, equity volatility jumps as well. You can...
by Bill | Oct 28, 2016 | US Economy
Retail sales will suffer in the months ahead due to rapidly rising medical and rental CPI. Whenever rental and medical costs have risen significantly in the past, they have led to a big decline in retail sales. You can see from the chart below that Medical CPI plus...
by Bill | Oct 7, 2016 | US Economy
The US now has the worst combination of outcomes, poor growth and rising inflation. Bond yields are now the most negative they have been in almost forty years. Only in the 1970s during stagflationary episodes were real yields this negative. We don’t see a high...
by Bill | Sep 23, 2016 | Featured, US Economy
The ISM Manufacturing Index came out at the beginning of the month and offers a dim view of the next three months for US manufacturing as well as for stocks. The key data we focus on in the ISM is the relationship between New Orders to Inventory. The ratio leads the...
by Bill | Sep 9, 2016 | US Economy
A discussion of late has been whether the Fed should raise its inflation target. We think this would be a bad idea. Currently, with a 2% target, the Taylor rule implies the Fed Funds rate should be closer to 2%. With a 3% inflation target, the Taylor rule would...
