The Independent Market Observer

The Fed Does Trick or Treat

October 31, 2019

Yesterday, the Fed announced that it was cutting rates one more time, in response to continued economic weakness. That decision was the treat. Markets responded accordingly, with stock markets rising. The trick, however, was in the implication—of the statement and the press conference—that this would be the last cut unless the economy deteriorated further. The implied probability of a December rate cut dropped to 22 percent, the dollar index dropped, and the rate on the 10-year Treasury declined. The Fed giveth and the Fed taketh away.

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The Big Picture on the Economy

October 30, 2019

There is a lot of economic data coming out this week: consumer confidence, third-quarter economic growth, personal income and spending, the ISM Manufacturing number, the jobs report on Friday, and, of course, the Fed’s decision on interest rates (which, if you haven't heard, resulted in another quarter-point cut this afternoon). We will get a much better understanding of where we are by the end of the week, and we will talk about what all that data means.

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Is Another Stock Market Record Reason to Cheer?

October 29, 2019

Yesterday, the market—or at least the S&P 500 and the Nasdaq 100—hit new records. Again. But should we care? And do these most recent highs tell us anything about the future?

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Monday Update: Housing Sales Decline in September

October 28, 2019

Last week’s economic updates largely disappointed, with housing sales, durable goods orders, and consumer confidence all declining. Upon closer inspection, however, we found some positive developments, with continued year-over-year housing growth as a highlight. This week will be very busy, with the Fed’s October rate-setting meeting, the first report on third-quarter GDP growth, and the October jobs report all on the docket.

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The Trade War: Is the Damage Done?

October 25, 2019

One of the topics I get a lot of questions about when speaking to clients is the trade war. They want to know what I think and whether whatever they’ve read in the latest headline will make a big difference. It has been a remarkably consistent question, through all the ups and downs, and the only difference is what exactly the latest headline is. My answer has also been consistent. I think the trade war is a big deal, but the latest headline doesn’t really matter. Why? Because the damage has already been done. It will just take a while to show up.

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Will the GM Strike Take Down Job Growth?

October 24, 2019

Normally, I don’t make predictions about where any individual economic stat will come out. There is enough noise in the system, and enough variance in the data collection process, that any individual report's results can vary enormously—and it still won’t mean anything.

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Are Politics to Blame for Waning Confidence?

October 23, 2019

I have written versions of this post before, but it is demanding to be written again. So, here we go.

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The Power of We

October 22, 2019

WeWork has been one of the trending business topics in recent weeks. The collapse of its initial public offering, followed by the ouster of its CEO and founder, and now the drama over whether (and if) the company will be rescued have provided some compelling drama. It has played out more like a TV show than an actual company. Watch for the movie shortly, I expect.

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Appearance on CNBC’s Power Lunch, October 21, 2019 [Video]

October 21, 2019

Do I think the stock buyback boom is over? I discussed this and more today on CNBC’s Power Lunch.

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Monday Update: Retail Sales Disappoint in September

October 21, 2019

Last week, important updates on retail sales, home builders, and industrial production yielded mixed results. This week, we’re expecting some more ups and downs, with updates to come on home sales, durable goods, and consumer confidence.  

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The Real Reason Interest Rates Will Stay Low

October 18, 2019

In yesterday’s post, we concluded that interest rates were influenced—but not set—by the Fed. We also observed that rates were influenced—but not set—by the supply and demand of capital. We noted in both cases, however, that there was considerable variance over what those two models indicated, which suggests there is something else going on.

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Where Do Interest Rates Come From?

October 17, 2019

We closed yesterday’s post with the observation that economic theory doesn’t really have a good grip on where interest rates come from. Today, I want to explore where we think rates come from and what that might mean.

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Interest Rates: The Old Normal

October 16, 2019

Yesterday, we started out this series with the observation that interest rates are likely transitioning to a new normal, which is different from the old normal. In other words, all of the projections that assume rates will be getting back to normal are wrong—because the definition of normal has changed.

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Why Are Interest Rates Trending?

October 15, 2019

Brexit. The impeachment. Hong Kong. The trade war. That’s a lot to discuss and to worry about. As always, though, there is a difference between what makes the headlines and what really matters. Not that those issues don’t matter—of course, they do. But in a couple of weeks or months, we will be talking and worrying about something completely different. Headlines come and go, but the deeper issues show their effects over years.

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Appearance on Bloomberg Markets: The Close, October 14, 2019 [Video]

October 15, 2019

Do I think it's going to be a tough earnings season for banks this year? I discussed this and more (my segment begins at 5:31) yesterday afternoon on Bloomberg TV's Bloomberg Markets: The Close.

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Monday Update: Inflation Slows Down and Consumer Confidence Rebounds

October 14, 2019

Last week’s news focused on inflation, consumer confidence, and the minutes from the Fed’s most recent meeting. This week will be another busy one, with reports on retail sales, housing, and industrial production scheduled.  

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Back to Basics: Lessons from an Investment Legend

October 11, 2019

Brad here. Every so often, it is a great idea to go back to the basics and make sure you are doing the fundamentals right. Brian Glazer, a senior investment consultant on our Investment Consulting Services team, spends his days working with advisors to help them do just that. He put together this piece that summarizes some lessons from a legend in the investment profession. It’s a good read and a great reminder of what we should be doing. Thanks, Brian, so over to you. Have a great weekend everyone!

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Economy Slowing—But Still Growing

October 10, 2019

I have been preparing a couple of big-picture pieces over the past couple of days, including the monthly economic risk factor and market risk updates, and it has been a bit eye opening. Conditions have deteriorated more than I had realized. Although I still don’t think we are in the trouble zone, we are certainly getting closer, as was shown in this month's Economic Risk Factor Update. I wanted to get a bit more into the detail around those risks today.

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Monthly Market Risk Update: October 2019

October 9, 2019

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

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Economic Risk Factor Update: October 2019

October 8, 2019

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

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Monday Update: Business Confidence Plummets Amid Disappointing Week

October 7, 2019

For the most part, last week’s news came in worse than expected, with notable declines in business confidence and a lackluster employment report drawing the most attention. This week will be busy, with updates on producer and consumer inflation, minutes from the Fed’s most recent meeting, and a consumer confidence survey all scheduled for release.

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Jobs Report a Mixed Bag

October 4, 2019

The big economic news today is the jobs report, which was a much more mixed bag than usual. Expect to see headlines saying it was a terrible report, a good report, and pretty much everywhere in between. In fact, on the whole, this report shows that while growth is slowing, the economy continues to expand and is likely to keep doing so. Let’s take a look.

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A Look Back at the Markets in September and Ahead to October 2019

October 3, 2019

September was a fairly good month for investors. Stock markets were up pretty much across the board, for both U.S. and international markets. For the quarter, a strong September took U.S. markets back into the black. International markets, which got hit harder, stayed in the red. But what do these results mean for October? Let’s take a closer look.

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Market Thoughts for October 2019 [Video]

October 1, 2019

September was a pretty good month, with U.S., international, and emerging markets all up. These results were surprising given the month’s events, including a drone strike on a Saudi oil complex and the impeachment inquiry of President Trump. Still, the fundamentals remained solid. New and existing home sales went up. We also saw strong personal income growth, leading to strong retail sales growth.

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