The Independent Market Observer

What Will the Next Recession Look Like?

June 28, 2019

There has been a great deal of coverage on slowing growth. Indeed, on this blog we have looked at signs that the recovery may be close to the end. What that means, of course, is that a recession may well be in the cards in the next couple of years. Although we are not there yet, now is a good time to take a closer look at what it could look like. After all, it has been more than 10 years since we last had a recession, and that one was not typical.

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Facebook Libra: Threat or Menace?

June 27, 2019

“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

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Consumer Confidence Down: A Bad Sign

June 26, 2019

As I kind of expected, some news did hit yesterday while my son and I were fishing that is definitely worth a closer look. The Conference Board’s survey of consumer confidence—one of the most underappreciated economic stats there is—dropped from 131.3 in May to 121.5 for June. This result is the lowest level since September 2017.

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Enjoying a Quiet Day at the Beginning of Summer

June 25, 2019

I spent this morning the way I usually do, reading the newspapers, looking at the economic reports, and scanning the futures markets. Also as usual, I found things to worry about: Consumer confidence, still high by historical standards, dropped more than expected in June, falling to its lowest level in almost two years. New home sales also missed expectations, declining for the second month in a row instead of climbing. The markets are down a bit as I write this . . . So far, so normal.

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Monday Update: Mixed Bag for Housing in May

June 24, 2019

Last week saw a handful of important economic updates, primarily focused on the housing market. The data was mixed, with disappointing home builder sentiment offset by better-than-expected sales growth. This will be another relatively quiet week on the economic update front, with only a few notable releases scheduled.

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Market Melt-Up? Maybe So

June 21, 2019

So much for sell in May and go away. The S&P 500 has hit another all-time high and is on track for the best June in more than 60 years (since 1955). New public offerings have exploded, with Beyond Meat and Slack the most recent wunderkinder. Companies are racing to go to the market. They know that with valuations at all-time highs and the risks rising, now is the time to sell at the best price they will likely get.

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The Fed to the Rescue?

June 20, 2019

The market has concluded that the Fed’s decision to keep rates steady, along with the accompanying statement from yesterday's meeting, is unreservedly dovish. The expectation is for two more rate cuts this year, starting in July. Markets are, unsurprisingly, cheering. Lower rates are good for economic growth and for stocks. In fact, that reasoning would explain why the Fed would cut. If the Fed does cut, it will be stimulative and should help sustain the expansion—as intended.

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Appearance on Yahoo Finance’s The Ticker, June 19, 2019 [Video]

June 19, 2019

This afternoon, I appeared live in studio on Yahoo Finance’s The Ticker to discuss today's Fed decision to leave interest rates unchanged. Listen in to learn more.

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Will the Fed Sit Tight on Interest Rates?

June 19, 2019

Today’s post will be a brief one as I am on the road. Besides, we don’t yet know how the main event of the day—the Fed meeting—will turn out. Will the Fed cut rates? Drop a strong hint that a rate cut is coming? Or just sit tight? And what will the White House do?

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Headline Risk Works Both Ways

June 18, 2019

Weeks of worry—about trade, growth, and Europe—knocked markets down. But today we have the reversal. Mario Draghi, the head of the European Central Bank (ECB), has once again come out in favor of looser monetary policy and lower rates, which cheered markets globally. And this morning, President Trump tweeted that he would be meeting with China’s leader, which further cheered markets. As I write this, the S&P 500 is up by 1 percent and well over 2,900. This level takes us to within 1 percent of a new all-time high.

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Monday Update: Strong Bounce Back for the Economy

June 17, 2019

Last week was full of positive economic surprises, making up for some disappointing data to start the month. This week will be a bit lighter on the economic update front, but there are still a few important releases to know about.

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Modern Monetary Theory and the Deficit

June 14, 2019

A controversial topic currently exciting economists goes by the name of Modern Monetary Theory (MMT). While there are many ways to interpret it (as you can see from its name, it doesn’t actually describe anything), the key tenet is that deficits don’t matter. Governments that control their own currencies, like the U.S., can spend whatever they want simply by printing more money. The controversy doesn’t come from this assertion—it’s a simple fact—but from the different interpretations of what, exactly, this means.

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The Inverted Yield Curve, the Fed, and Recession

June 13, 2019

One of the most reliable signals of a pending recession is when, in the jargon, the yield curve inverts. This sounds like a fancy phrase, but it simply means that investors demand to be paid more for a short-term loan than for a long-term one.

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Quick Takes: The Economy, the Fed, and More

June 12, 2019

This has been a busy week of catching up after attending another round of excellent Commonwealth conferences. So, today I have just a few quick takes on some wide-ranging topics.

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Monthly Market Risk Update: June 2019

June 11, 2019

It’s time for our monthly look at market risk factors. Just as with the economy, there are several key factors that matter for the market in determining both the risk level and the immediacy of the risk. Although stocks remain close to all-time highs, the recent volatility is a reminder that, given valuations and recent market behavior, it is useful to keep an eye on these factors.

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Monday Update: Jobs Report Disappoints

June 10, 2019

There were a number of important economic updates released last week, as is normally the case when we start a new month. Most of the news came in worse than expected, although there were some positive surprises. This week will also be busy, with looks at consumer sentiment and retail sales.

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Economic Risk Factor Update: June 2019

June 7, 2019

After a difficult first quarter, April’s data was better. But, in aggregate, May has not continued that improvement. Job growth has slowed further, taking it closer to a risk level. Plus, the interest rate outlook continues to deteriorate, with the yield curve now inverted for a period of weeks. Not all the news was bad: both consumer and business confidence improved, which should help growth going forward. Overall, though, risk levels have increased somewhat.

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Reality Check: The Risks Are Rising

June 6, 2019

I do a semiannual update of my economic and market outlook every year, usually in several versions over a one- to two-month period. In the past couple of years, that strategy has worked. Fundamental conditions didn't change much over that period, even though headlines often did.

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A Look Back at the Markets in May and Ahead to June 2019

June 5, 2019

“Sell in May and go away” was certainly on point last month. With U.S. and global markets down significantly, investors closed out the month with a level of worry we have not seen since the end of 2018. Let’s take a look back at this volatile month, as well as what we might expect going forward.

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Market Hits Turbulence, But Economy Still Growing

June 4, 2019

Yesterday, the tech stocks got hit hard on news that Washington will be taking a much harder look at regulating them. Trade worries continue to reverberate throughout the market. And fears of a more severe slowdown—or even a recession—are building as the yield curve remains inverted. Further, the Nasdaq moved into correction territory yesterday (defined as a decline of more than 10 percent from the peak), although as of this writing, it was showing signs of a strong bounce today. 

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Monday Update: Latest Economic Reports Beat Expectations

June 3, 2019

There were only a handful of important economic updates last week, but many came in better than expected. We will see a full slate of reports in the week ahead as we kick off the new month.

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Market Thoughts for June 2019 [Video]

June 3, 2019

May was a tough month, with U.S. and international markets down. At the same time, last month’s decline could be considered modest, and it was not based on fundamentals. Instead, it was all about confidence, which was rattled by a reignited trade war with China and proposed tariffs on Mexico. Still, there was some good news. Consumer spending picked back up, and job growth remained strong.

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