Bullard: “50’s at Every Meeting”St. Louis Fed James Bullard threw more fuel on the 'interest rate fire' today - suggesting the nominal Fed funds rate needs to be at 3.50% by the end of the year. And if he had his way - that would roughly be 100 basis points higher than what's currently shown on the Fed dot plot.
There’s Only One Way to Fix InflationMore bad news on the inflation front today... this time with Producer Prices. The producer price index (PPPI) - which measures prices paid by wholesalers - was up 11.2% from a year ago - a fresh record. This is especially bad news as it's a precursor to what to expect with consumer inflation. In other words, higher prices are typically passed on.
CPI Hits 8.5% – Highest Since 1981Consumer price inflation (CPI) for March hit its highest level since 1981 - a staggering 8.5%. Core CPI — which excludes food and energy prices —was up 6.5% YoY. Troubling numbers...especially for average earning Americans who are now spending $5K per year more just on gas and food.
Real Yields Suggest No Recession in 2022Over the past fifty years, the inversion of the 2-year / 10-year yield curve (aka '2-10') has predicted every recession. Given its reliable predictive power - its recent inversion consumes financial media. There's just one problem: It's lousy at timing.
What ‘Shock’ Will 2022 Deliver?Bank of America's top strategist Michael Hartnett issued this note today: "Inflation shock is worsening; rate shock is beginning; and recession shock is coming". Let's explore...
How Much ‘Fed’ Has the Market Priced In?From mine, your 2022 investing / trading 'equation' looks like this: more Fed equals more volatility. The world's most influential central bank confirmed it will act quicker than initially anticipated to reduce its $9 Trillion balance sheet. This is known as 'quantitative tightening' (QT) - intended to reduce the supply of money. And it's about 12+ months overdue...
Why Rates need to Rise Above Inflation LevelsWhen adjusted for inflation, interest rates are deeply negative. In fact, they are historically as low as we've ever seen. As regular readers will know, this is a large reason why risk assets have rallied so much the past couple of years; i.e., your cash is effectively trash (losing some 8% per year).
S&P 500 Loses 5% for Q1 2022Yesterday I warned readers to treat this rally with caution. Let's just say it was "tripping a few wires". For example, meme stocks were rallying more than 150%... Cathie Wood's ARKK ETF was starting to move sharply... and short-term option trading hit 2021 frenzy levels. Market froth was back...
Bond Markets are Always Early… and Typically RightThe stock market is euphoric. It's rising faster than a 1999 internet stock! The bond market however does not share its new-found enthusiasm. It's starting to dust off the "recession playbook". Too early? Maybe... but it does remind me of an old Wall Street saying... "Bond markets are always early... and typically right"
Rates, Inflation and Oil to Dictate the NarrativeTune into any mainstream financial market headline - the narrative is bound to include inflation, interest rates and the price of oil. This is what's most likely to drive the price of stocks for the balance of the year...
