Take a deeper dive into the global repercussions of recent political events and explore the economic forces of inflation, wages, interest rates, taxes, unemployment, and national currencies and their potential effects on investors and policymakers, in the U.S. and around the world.
The past few years suggest we may be entering a period of “Great Volatility” as the global economy has been buffeted by the COVID-19 pandemic, Russia’s invasion of Ukraine, and the effects of climate change. While these forces will likely lead to weakness ahead, decisions that central banks take to address high inflation can mitigate and limit the ultimate impact of these shocks.
Some experts think that today’s energy crisis may become worse than the 1970s oil shock. Will Russia cut back on the contracted supplies of natural gas to Europe? If so, governments will need to secure supplies from global sources across the EU and to prepare gas rationing programs.
For the first time in the post-war era, the global economy has been buffeted by two shocks—the worst public health disaster in one hundred years combined with Russia’s invasion of Ukraine. What should investors do amid the heightened uncertainty?
COVID-19, international war, and inflationary concerns have all created a ripple effect through the stock market and the economy. It’s still uncertain whether the United States will fall into a recession; however, looking at certain trends from our history allows us to gain insight on what we may expect in the near future.
As we reach the midpoint of the year, investors find themselves confronting a highly challenging environment, with the Federal Reserve now emphasizing the urgency of bringing inflation under control over maintaining “maximum” employment.
At a time when both U.S. stocks and bonds have sold off significantly, the U.S. dollar has exhibited considerable strength against most currencies. Thus far, U.S. policymakers have not expressed concern about the dollar’s strength, as it helps to temper high inflation. But, it could become an issue if a deteriorating trade imbalance weakens the U.S. economy at some point.
Periods of market volatility are often reminders for investors to ensure investment strategies and risk tolerance are properly aligned. In this episode, we discuss recent market volatility, its implications for investors, and considerations for portfolio positioning going forward.
Investors should monitor the state of emerging economies, who often feel the fallout from Fed tightening when the U.S. economy is weakening and in several instances have caused the Fed to back off raising rates.
In the wake of Russia’s invasion of Ukraine, the need for a clear international strategy has heightened. The U.S.’s response to the Russian invasion has been formidable, but it has yet to formulate a clear approach for China and allies in Asia.
Investors need to weigh how good of an investment vehicle housing may be going forward. The main concern today is that housing is becoming increasingly unaffordable for many Americans, a result of record home price appreciation in the past two years coupled with surging mortgage rates this year.
With federal debt at record levels, inflation at four-decade highs, and the Federal Reserve about to tighten monetary policy, federal spending must be brought under control. How can President Biden move ahead with increased defense spending while also focusing on domestic priorities?
While investors currently are focused on the near-term impact of Russia’s invasion of Ukraine on the global economy and markets, the history of the Cold War suggests it may also have significant long-term repercussions.
The average 30-year fixed-rate home loan has increased to 3.6% from 3.1% at the end of last year, which is the highest level since the coronavirus pandemic struck two years ago. This raises the question about how the U.S. housing market would respond to ongoing Fed tightening.
After the past two presidential elections, there has been a growing narrative about “two Americas.” One consists of thriving urban areas that voted overwhelming for Hillary Clinton and Joe Biden and the other of “hurting” rural communities that went heavily for Donald Trump.
While skeptics believe the Fed is behind the curve, investors have not lost confidence in it. But if bond yields and the dollar were to drift higher, the stock market could encounter turbulence in the coming year after smooth sailing over the past seven quarters.
Looking at the year ahead, several questions remain. Will the coronavirus pandemic finally be reined in? How will bond yields fare as the Federal Reserve tightens monetary policy? And, will risk assets continue to outperform?
Are inflation pressures likely to moderate, or is higher inflation here to stay? And, should the Fed be doing more? This episode discusses how investors may consider positioning their portfolios in light of these risks.
Why should President Biden do what no other U.S. president has done and indicate he is on board for the Fed to raise rates in an election year? The argument is based on both economic and political considerations.
Investors do not appear rattled by inflation news, and 10-year Treasury yields are little changed at just over 1.5%, implying investors are willing to accept a negative real yield of more than 2 percent to hold government debt.
Even though we see the economic outlook as generally favorable after a strong stock market run and re-opening activity, we recognize that market volatility may increase, and some investors may be turning cautious—due to a variety of risk factors.
The logic is that the over long periods the valuation of the stock market should mirror the performance of the economy. However, there can be significant deviations in the interim owing to cyclical forces.
When the international monetary system shifted from a fixed to a floating exchange-rate regime 50 years ago, it was a milestone event that marked the end of a prolonged period of low inflation, strong economic growth, and financial stability.
Since Xi Jinping became China’s leader in 2012, he has taken steps to reverse the trend of allowing China’s communist system to evolve into a more market-oriented model in which private businesses coexist alongside state-owned enterprises.
Investors have faced a nearly 40 basis point drop in Treasury bond yields over the past month. Two competing explanations have been put forth, and it is important to understand both because they have different implications for financial markets.
The bottom line is that in addition to their inherent risks, cryptocurrencies now face added regulatory burdens. For these reasons, we believe privately issued digital currencies should be considered speculative instruments.
The policy shift that is occurring is an opportunity to test the precepts of Keynesian economics that embrace the government’s role in the economy versus supply side policies that favor tax cuts and deregulation.
The $1.9 trillion COVID stimulus plan has been greeted enthusiastically by investors as the U.S. stock market has set record highs. However, with the U.S. budget deficit reaching extreme levels, some economist are concerned the U.S. economy could overheat and lead to inflation.
One of the main objectives of the incoming administration is to counter growing income inequality in America. However, investors are likely to judge the Biden administration’s policies primarily by how they impact the U.S. economy overall.
Congress crafts a plan providing much-needed relief for COVID-19. Several factors coalesced encouraging Congressional leaders to reach an agreement but it may be difficult to sustain the spirit of compromise.
The U.S. dollar experienced a remarkable run over the past decade. March became the turning point coinciding with unprecedented U.S. policy actions to combat COVID-19. The dollar is likely to remain under pressure for the balance of the year and into 2021.
There is a high degree of uncertainty about how the economy will fare in the balance of 2020 and into 2021. Many investors are upbeat that it is headed for a quick recovery, but most economists believe recovery will be gradual and uneven following an initial bounce. What weighs on Fed officials is the possibility of a second wave of coronavirus cases that could hinder the re-opening of businesses.
The May jobs report surprised many investors who were prepared for a large increase in the jobless rate. While the news was a relief to the Federal Reserve, the numbers underestimate the full impact of COVID-19 on labor. Even though the U.S. stock market is back to levels before the pandemic, the path to recovery is still unclear.
While the U.S. government’s efforts to combat COVID-19 will likely lead to a post-war record budget deficit, bond yields have fallen to record lows amid a global recession. The long-term prognosis is problematic, however, because deficits are likely to remain abnormally high this decade.
The conflict over oil and growing worries about COVID-19 marks the first time the global economy experienced simultaneous supply shocks. Markets are now signaling a tipping point has been reached with the global economy on the cusp of recession.