The Independent Market Observer

Welcome to the New New Normal

March 29, 2018

In the first couple of years after the financial crisis, there was a lot of discussion about the “new normal.” This referred to the new environment characterized by lower interest rates, lower growth, lower inflation, and lower volatility. The sense was that things really were different this time, and we had to understand that.

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How to Worry Effectively About the Market

March 28, 2018

I suspect that many of us are worried about the stock market. I certainly am, but what else is new? That’s why they call me Eeyore. But worrying by itself doesn’t do any good. What is important is to figure out how to worry effectively. That is, by identifying the real signs of trouble, you can focus on those and not worry until there really is something to worry about. I think we could all use a refresher on how to do this.

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The Markets Bounce Back: What’s Going On?

March 27, 2018

Wow. After a significant decline last Thursday and Friday, markets bounced back yesterday in a big way. What’s going on?

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Monday Update: Fed Raises Rates, Tariffs Rock Markets

March 26, 2018

Last week’s economic news focused on the Fed and tariffs. This week, there are only two major reports, but each will give us a look at the all-important consumer.

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Beyond Tariffs: More Changing Fundamental Trends

March 23, 2018

The big news yesterday was the market decline after the announcement of U.S. tariffs on Chinese goods. As we saw with the previous round of tariffs, markets are pulling back and forth between the very real potential damage a trade war could cause and the likelihood that one won’t happen.

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A New Round of Tariffs: Keep Calm—But Pay Attention

March 22, 2018

The economic news today should be about the Fed and how its new chairman sounded at the press conference yesterday. Indeed, there has been some commentary on that, and it was largely good. But any Fed news has been overshadowed by the expected (now confirmed) announcement from the White House of a new round of tariffs on China. Markets have taken note by heading down, so that is what we will be discussing today.

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Is the Housing Market Rolling Over?

March 21, 2018

I consider housing to be one of the key drivers of the economy. This is true from a fundamental basis—with housing driving construction and mortgage finance, which are significant parts of the economy, plus all sorts of indirect spending such as furniture. But it also holds true from a confidence and wealth-building perspective. Homeownership provides a level of economic security for most families that enables them to save and invest at higher levels, even before considering the substantial economic benefit of home appreciation. Housing matters for a reason.

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Fed Meeting Preview: Getting to Know Chair Jerome Powell

March 20, 2018

The regular meeting of the Federal Open Market Committee (better known as the Fed) starts today and ends tomorrow with an official statement followed by a press conference. Markets expect the Fed to announce that interest rates will rise another 25 basis points, with 100-percent probability. Further, they are currently pricing in another couple of increases this year, as you can see in the Bloomberg chart below.

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Monday Update: Industry Strong, But Consumer Spending Slowing

March 19, 2018

Last week was a busy one for economic news, with five major reports covering all areas. But this week, all eyes will be on the Fed. Let’s take a closer look.

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No Economic News Is Good News

March 16, 2018

One of the best ways to tell that the economic news is good is that it simply isn’t showing up in the news. The old media saying, “if it bleeds it leads,” means you don’t see a lot of good news on the front pages. Hence, we now have politics taking the lead, along with various disasters. When business stories do appear, they are typically company specific and focus on (what else?) bad news. The Toys R Us bankruptcy is a case in point today.

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Remembering Dr. Stephen Hawking: Lesson for Investors

March 15, 2018

Today, I would like to pause and remember the life and work of Dr. Stephen Hawking, renowned physicist and a personal hero of mine. His life combined a commitment to science with a complete refusal to give in to a debilitating medical condition. Instead, not only did he continue to learn and grow, but he extended the limits of human knowledge—quite literally to the end of time. Not all heroes wear capes, as the saying goes, and his heroism in continuing to live and work in the face of illness is beyond all admiration. Thank you, Dr. Hawking, not just for your work but for the inspiration and example of a life well lived.

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Could the Great Financial Crisis Happen Again?

March 14, 2018

Today marks the 10th anniversary of the failure of the Wall Street firm Bear Stearns, widely considered the opening act of the great financial crisis of 2008. Bear was done in, so the story goes, by a mix of ill-considered bets on mortgage securities and excessive borrowing. After it went down, banks started to look around to see what other companies might fail—and found that they really couldn’t tell. As a consequence, each bank started to pull back individually, and the flow of liquidity that supported Wall Street fell apart. As each bank pulled away, the fears of collapse started to turn into reality, which only worsened the problem. The downward spiral led to what we now know as the great financial crisis, from which we have been recovering for the past 10 years.

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Monthly Market Risk Update: March 2018

March 13, 2018

This is another special edition of the market risk update, following a significant bounce from the February pullback. Overall, the conclusion of a green light last month was correct, as much of the damage proved to be temporary. But it is worth taking a look at what happened and why. Where special comments are needed, they will be in italics.

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Monday Update: Jobs Report Exceptionally Strong

March 12, 2018

There were three major economic reports last week, which gave us a look at the service sector, trade, and—most important—the job market. The week ahead will be a busy one, with five major reports expected.

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Economic Risk Factor Update: March 2018

March 9, 2018

February’s data continued to be quite good. We saw improvements in many areas, particularly in employment, suggesting continued and possibly accelerating growth into 2018. Job growth jumped substantially, coming in well above expectations, and both consumer and business confidence remained at very high levels. Fed policy continues to be stimulative, and recent increases in long-term rates steepened the yield curve—often a positive sign. Overall, this month’s strong economic data indicates that the weakness at the end of 2017 has passed, although policy remains a concern, particularly around trade.

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An Economic Forecast: The Jobs Report, Tariffs, and Bear Stearns

March 8, 2018

I woke up this morning to a surprise. It had snowed, which was expected. After all the fear-mongering coverage, in fact, I expected the house to be covered, but it wasn’t so bad. The real surprise was the fact that a combination of wind and heavy snow had taken down several trees—including an 18-footer right across most of my driveway. All of a sudden, I was cut off.

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Gary Cohn Resigns: The Other Shoe Has Dropped

March 7, 2018

Yesterday, I wrote that the markets were likely to continue to trend upward, on the idea that the U.S. tariffs were not really going to happen. But then the news that Gary Cohn had resigned as head of the National Economic Council was announced—and this has changed that perception entirely.

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Market Ups and Downs: What's Going On?

March 6, 2018

Well, that was quick. After a sharp but short pullback in late January/early February, the market started to rally again. But it was derailed by the announcement—by the U.S. president—of an impending trade war. Then, after an even shorter and less sharp pullback, it seems to have started to rally again (although it is slightly down as I write this). What’s going on?

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Appearance on CNBC's Power Lunch, March 5, 2018 [Video]

March 5, 2018

As the bull market reaches its ninth year, what will it take to actually bring it down? Or will the market continue to rise? I discussed this and more earlier today on CNBC's Power Lunch.

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Monday Update: Consumers Confident, Business Investment Slowing

March 5, 2018

There were five major economic reports last week, which gave us a detailed look at both the consumer and manufacturing. This week, we’ll see three major reports, which will give us a view of the service sector, trade, and the job market.

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Market Thoughts for March 2018 [Video]

March 2, 2018

February was an eventful month for the markets. There was a 10-percent market drawdown in the U.S., something we haven’t seen for almost two years. Although many were worried that this was the “big one,” the markets recovered more than half of their losses by month-end, and the economic fundamentals remain sound.

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What the Steel and Aluminum Tariffs Mean for Your Investments

March 2, 2018

Yesterday, President Trump announced that the U.S. will be imposing tariffs on steel and aluminum imports. This shocked markets here in the U.S. and around the world, driving them back down just as it looked like they were recovering from the downturn last month. What happened? And is this a more serious threat going forward? In a word, yes.

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A Look Back, a Look Ahead: An Economic Snapshot

March 1, 2018

As we head into March, I thought it would be a good time to take an economic snapshot—by looking back at February and at what we might expect in the month ahead.

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