Broker Check

Weekly Market Commentary

June 27, 2022

Last week, bad news was good news.

Consumers were feeling blue in June, according to the University of Michigan Consumer Sentiment Survey. The survey scored sentiment at 50, which was the lowest level on record. Surveys of Consumers Director Joanne Hsu reported that 79 percent of consumers anticipate business conditions will decline during the next 12 months, and almost half indicated they are spending less because of inflation.

Consumer pessimism was reflected in the S&P Global Flash US Composite PMI. The Index measured that manufacturing growth was at the lowest level in almost two years. “Declines in production and new sales were driven by weak client demand, as inflation, material shortages and delivery delays led some customers to pause or lower their purchases of goods,” reported S&P Global. The Index was at 52.4. Any reading above 50 indicates growth.

Unhappy consumers and slower growth in manufacturing made investors very happy. Consumer spending drives the economy. So, if consumers begin to spend less and economic growth slows, then the Federal Reserve may slow its rate hikes or raise rates by less. Last week Fed Chair Jerome Powell told Congress:

Read more

June 21, 2022

The fight against inflation intensified.

Last week, the Federal Reserve (Fed) delivered a message that it is serious about fighting inflation. The Federal Open Market Committee (FOMC) lifted the federal funds target rate by 0.75 percentage points. The fed funds rate is now 1.50 percent to 1.75 percent.

The Fed also has begun to shrink its $9 trillion balance sheet by selling Treasury securities and agency mortgage-backed securities, a process known as quantitative tightening (QT), reported Kate Duguid, Colby Smith, and Tommy Stubbington of Financial Times (FT). The Fed’s balance sheet expanded greatly during the past few years as it engaged in quantitative easing (QE). QE entailed buying Treasury and agency securities to ease financial conditions, strengthen the economy, and support markets during the pandemic.

Read More

June 13, 2022

Inflation is proving to be far more tenacious than markets had hoped.

The idea that inflation peaked in March was put to rest last week when the Consumer Price Index (CPI) showed that inflation accelerated in May. Overall, prices were up 8.6 percent last month, an increase from April’s 8.3 percent. It was the highest inflation reading we’ve seen since December 1981.

The most significant price increases were in energy (+34.6%) and food (+10.1%). That’s unfortunate because the War in Ukraine has a significant influence on food and energy prices right now, and no one knows how long it will last. In April, the World Bank’s Commodity Markets Outlook reported:

“The war in Ukraine has been a major shock to global commodity markets. The supply of several commodities has been disrupted, leading to sharply higher prices, particularly for energy [natural gas, coal, crude oil], fertilizers, and some grains [wheat, barley, and corn].”


Read more

June 6, 2022

How strong is the United States economy?

That’s the question investors were mulling after last week’s jobs report.

More jobs were created in May than economists expected, and the labor force participation rate rose, meaning even more people are returning to work. Overall, the unemployment rate remained at 3.6 percent. However, unemployment rates varied by age, sex and race:

  • Adult men: 4 percent
  • Adult women: 4 percent
  • Asian: 4 percent
  • Black: 2 percent
  • Hispanic: 3 percent
  • White: 2 percent
  • Teenagers: 4 percent

 

Read more

May 31, 2022

Investors reassessed and markets bounced.

Last week, major U.S. stock indices moved higher for the first time in weeks. The Dow Jones Industrial Average gained 6.2 percent, the Standard & Poor’s 500 Index was up 6.6 percent, and the Nasdaq Composite rose 6.9 percent, reported Ben Levisohn of Barron’s.

The change in investor attitude may have been influenced by a variety of factors, including:


Read More

May 23, 2022

On the fear and greed cycle.

One of the most challenging times for investors is a market downturn. Whether markets are experiencing a correction or a bear market, it’s really disturbing to watch the value of your savings and investments decline.

Last week, the CNN Business Fear & Greed Index showed extreme fear was the emotion driving investment decisions. The Index “is a way to gauge stock market movements and whether stocks are fairly priced. The theory is based on the logic that excessive fear tends to drive down share prices, and too much greed tends to have the opposite effect.”

Read more

May 16, 2022

Living with a bear.

On the survival series “Alone,” the tension ratchets higher whenever participants encounter bears. Some participants live warily alongside bears, while others tap out. A similar thing happens among investors when they encounter a bear market.

What is a bear market?

People define bear markets in different ways. Some people say a share price decline of 20 percent is bear market territory. Last week, the Standard & Poor’s (S&P) 500 Index was down 19.6 percent before Friday’s rally, according to Ben Levisohn of Barron’s, and the Nasdaq Composite was already down more than 20 percent.

Other people say a bear market occurs when more investors are bearish than bullish. That’s certainly the case today. The Association of Independent Investors’ Consumer Sentiment Index found 49 percent of investors were bearish and 24 percent were bullish last week. Other sentiment indicators, including the Consensus Bullish Sentiment Index cited by Barron’s, also show that investors and investment professionals are feeling more bearish than bullish.

 

Read More

May 9, 2022

There is a lot of uncertainty in financial markets – and markets hate uncertainty.

In recent weeks, economic and financial market data have been telling different stories – and that makes it tough for investors to know where the United States economy is headed. Since stock markets move up and down based on what investors think will happen in the future, markets have been volatile. Here are some of the issues that have contributed to recent uncertainty.

  • Is economic growth slowing? At the end of April, the advance estimate for gross domestic product (GDP), which is a measure of economic growth, showed the U.S. economy contracted (-1.4 percent, annualized) during the first quarter of 2022. It was a puzzling piece of information because consumer spending, which accounts for more than two-thirds of economic activity rose by 2.7 percent during the period – after being adjusted for inflation – which suggests the economy is strong. A discrepancy between imports (up) and exports (down) appeared to be the driver behind the decline in GDP. A contraction can be a sign that the economy is weakening.
  • Is economic growth continuing? Right now, workers are in demand, which can be a sign of economic growth. Last week’s unemployment report showed stronger-than-expected jobs growth in April. The unemployment rate was 3.6 percent, and average hourly earnings rose by 5.5 percent, annualized. However, the labor force participation rate – the percentage of people who are working or actively looking for work – ticked lower. This could be due to the latest wave of COVID-19, reported Patti Domm of CNBC.


Read More

May 2, 2022

Correction and contraction....

Investing during 2022 has been like running a forest trail and having unexpected obstacles appear every so often – a fallen tree, a swarm of biting flies, a bear with cubs – you get the idea. To-date, economic, coronavirus-related, and geopolitical events have taken a toll from stock and bond markets, as well as the U.S. economy. For example:

  • Prices were high as we entered the year and have continued to rise. Last week, the Personal Consumption Expenditures Price Index, a broad gauge of inflation across the United States, reported that inflation was 6.6 percent in March 2022, up from 5.8 percent in December 2021.
  • The Russia-Ukraine War is pushing inflation higher. Russia and Ukraine are major exporters of energy and agriculture products, and exports have been limited by the war. Consequently, the World Bank’s Commodity Market Outlook forecasts that energy prices will rise by 50.5 percent and non-energy prices by 19.2 percent this year before moving lower again in 2023.
  • China is locking down cities to fight a surge of COVID-19 and snarling supply chains. “Ships have been piling up outside Shanghai, the world’s largest port, and other container docks across China as authorities have forced multiple cities into lockdown to counter the country’s worst COVID outbreak since the pandemic began,” reported Eamon Barrett of Fortune. Cross-border restrictions on trucking have also created issues.
  • The Federal Reserve began raising the fed funds rate to address inflation. The Fed is expected to raise rates significantly this year as it works to reduce demand and lower inflation. When interest rates move higher, the cost of borrowing increases, and economic activity slows. As a result, some investors are concerned about the possibility of recession.
Read more

April 25, 2022

The Federal Reserve’s Ice Bucket Challenge…

Remember a few years ago when people raised money for charity by challenging others to pour buckets of icy water over their heads? Last week, the Federal Reserve poured a bucket of ice water over the United States stock market. Randall W. Forsyth of Barron’s explained:

“In the past week, Fed officials stepped up their rhetorical anti-inflation campaign, with Jerome Powell all but promising a half-point increase in the federal-funds target range at the next Federal Open Market Committee meeting, on May 3-4. And other Fed district presidents raised the possibility of more forceful action, including rate hikes of as much as three-quarters of a percentage point, something the Fed hasn’t done since 1994.”

The Fed’s goal is to slow high inflation, which has been exacerbated by the war in Ukraine and China’s coronavirus lockdowns, without pushing the American economy into a recession. The question is whether the economy is strong enough to continue to grow as the Fed tightens monetary policy – and opinions about that vary.


Read more

April 18, 2022

Here’s a riddle: How can inflation be 8.5 percent and 6.5 percent at the same time? The answer is that it depends on how you measure it.

Determining how quickly prices are rising or falling – and where they may be headed in the future – is not simple. In the United States, millions of goods and services are bought and sold every day – shelter, food, transportation, energy, water, education, childcare, equipment and tools, medical care, furnishings, apparel, trash removal, and much more.

The government relies on two indexes: the Consumer Price index (CPI) and the Personal Consumption Expenditures Index (PCE). Each index has two versions: headline inflation and core inflation.

Last week, the Bureau of Labor Statistics (BLS) reported that CPI headline inflation was up 8.5 percent in March, and CPI core inflation was up 6.5 percent.

Read More

April 11, 2022

The first quarter of 2022 was jam-packed with volatility-inducing events: rising inflation, war in Ukraine, rising interest rates, sanctions on Russia, and a new COVID-19 outbreak in China.

Here’s a brief review of what happened during:

Inflation continued to rise. At the start of the year, consumers and investors were primarily concerned about inflation. In February, the Personal Consumption Expenditures Price Index showed core inflation, which excludes volatile food and energy prices, was up 5.4 percent year-over-year. That’s well above the Federal Reserve (Fed)’s two percent target for inflation.

The Fed began to tighten monetary policy late in 2021 by curtailing its bond-buying program. Investors expected the Fed to continue fighting inflation in 2022 by raising the federal funds target rate. Raising rates makes borrowing more expensive, which causes consumer and business spending to slow, demand for goods and services to drop, and prices to move lower, reported Carmen Reinicke of CNBC.


Read more

April 4, 2022

Checking in on the Federal Reserve. 

Among other things, Congress asks the Federal Reserve to use its tools to promote price stability and  maximum employment. Last week, economic data provided information about both.

 Inflation continued to increase

 Price stability means ensuring the prices of goods and services increase at a slow and stable pace. Last week, the Bureau of Economic Analysis reported that consumer prices rose 5.4 percent, year-over-year in February, excluding food and energy. When food and energy were included, inflation increased 6.4 percent.

 Personal income increased, too, but not quite as quickly as inflation did. 

Read more

March 28, 2022

Be careful what you ask for, you just might get it.

 In early March, almost two-thirds of Americans who participated in a Nationwide Retirement Institute survey said the Federal Reserve (Fed) should take more aggressive action on inflation. The next week, the Federal Open Market Committee (FOMC) did just that. It increased the target range for the Federal funds rate by a quarter point to 0.25 percent to 0.50 percent.

 When rates rise, borrowing becomes more expensive. The change often reduces demand and pushes prices – and inflation – lower. Last week, the Fed rate hike began to affect consumers and investors in a variety of ways. We saw:

 

Read more

March 21, 2022

Markets were reassured by the Federal Open Market Committee (FOMC)’s actions last week.

The FOMC met on March 16 and did exactly what most people expected them to do. They raised the federal funds target rate by a quarter point. Federal Reserve Chair Jerome Powell said the Fed expects to continue to raise rates and reduce its balance sheet during 2022 to lower inflation.

The bond market appeared to give the Fed a vote of confidence. The yield on the two-year UST, which is the maturity that’s most sensitive to expectations for future rate hikes, rose from 1.75 percent at the end of last week to 1.97 percent. The yield on the benchmark 10-year UST also increased, but not by as much.

Read more

March 14, 2022

Investor optimism is quite low.

In just two weeks, the war in Ukraine has changed the status of 1.3 million people – approximately the number of people who live in Philadelphia or Phoenix – from citizen to refugee, reported Rachel Pannett and colleagues at The Washington Post.

Investors have been sharply focused on the shorter-term implications of the war, which include slower economic growth and rising inflation as commodity prices soar, supply chains falter and some goods become more scarce, reported Matt Peterson of Barron’s.

Read more

March 7, 2022

The world is adapting to a changing reality.

As the war in Ukraine intensified last week, financial markets grappled with uncertainty.

“After watching financial markets gyrate from hour to hour as Russia attacked Ukraine, I was getting dizzy myself,” reported Jeff Sommer of The New York Times. “People in Ukraine were dying. The Russian president, Vladimir V. Putin, put his nuclear forces on alert, and Western sanctions were beginning to bite. One moment stocks were up, the next they were falling. Then they were up again.”

Read more

February 28, 2022

The Markets 

Last week, Russia invaded Ukraine.

 Russian President Vladimir Putin’s decision ignited the biggest military conflict in Europe since World War II. The war is already exacting a terrible human toll. It has also disrupted global markets and raised questions about the potential economic impact on Russia, Ukraine and the rest of the world.   

The Russia Trading System (RTS) Index, which is a gauge of the Russian stock market, dropped 38 percent early last week, although “financial markets partially recovered during Friday’s session…as traders assessed a wave of sanctions imposed by western powers that spared the country’s energy sector on which other parts of Europe are strongly dependent,” reported Robin Wigglesworth and colleagues at Financial Times (FT).

READ more

February 21, 2022

The Markets

 Investors’ appetite for risk diminished as the Russian threat to Ukraine intensified.

 Volatility was high last week as investors guessed and second-guessed how markets would react if Russia invaded Ukraine and sanctions were imposed on Russia. They also wondered what would happen if Russia pulled back. The questions are difficult to answer. Adam Samson, Valentina Romei and Matthew Rocco of Financial Times reported:

 “Economists can at least attempt to predict the outcome of central bank decisions by building models based on data, commentary from officials and historical precedent. But the outcome of the stand-off between Russia and the west is a type of so-called tail risk that could have major implications for the global economy, yet cannot be easily or accurately modelled. The sense of uncertainty has begun creeping into financial markets.”

Read more

February 14, 2022

Why did stock markets in the United States finish the week lower?

 If this were Jeopardy, acceptable answers to that question might include:  

  • Rising inflation. Major U.S. stock indices were trending higher until the Consumer Price Index (CPI) Summary showed inflation at a 40-year high. Consumer prices overall were up 0.6 percent in January with seasonal adjustment, and 7.5 percent over the last 12 months without seasonal adjustment, according to the U.S. Bureau of Labor Statistics. U.S. stocks sold off sharply on the news before regaining lost ground.
Read more

February 7, 2022

The Markets

 A rosy view through the rearview mirror.

 To say that economists did not have great expectations for the January employment report might be understating their position. It was widely believed that the spread of the COVID-19 Omicron variant would translate into a dismal jobs report.1 It didn’t.

 “After some estimates called for U.S. payrolls to decline by as much as 400,000, the labor market shockingly added that many jobs in January – and then some,” reported Olivia Rockeman of Bloomberg.

 The United States added 467,000 jobs in January, and the numbers for November and December were adjusted upward, too, by more than 700,000, reported the Bureau of Labor Statistics.

READ MORE

January 31, 2022

Last week, the January stock market decline was interrupted by a Friday afternoon rally.

“The S&P 500 rose 2.4 percent, its biggest one-day jump since June 2020, while the technology-heavy Nasdaq composite rose 3.1 percent. Friday’s gain snapped a three-day streak of losses and left the S&P 500 up 0.8 percent for the week, its first weekly gain this year,” reported Coral Murphy Marcos of The New York Times.

The change in direction may have reflected: 

  • Confidence in the resilience of the U.S. economy. The U.S. economy grew 6.9 percent in the fourth quarter of 2021, despite the spread of the Omicron variant. Over the full year, the economy expanded by 5.7 percent. It was the strongest quarterly growth since 1972 and the strongest annual growth since 1984, reported the Bureau of Economic Analysis.


 

 

 

Read more

January 17, 2022

 Is the economy doing well, or not?

 If you skimmed the headlines last week, you may have seen that retail sales – the purchases we make from stores in-person or online – declined 1.9 percent in December. The statistic may have raised questions about the strength of the economy. After all, how could retail sales move lower during the holiday season?

 Media headlines speculated that the spread of the Omicron variant, rising inflation, and consumer grumpiness were to blame. Economists had other ideas, according to Logan Moore and Megan Cassella of Barron’s. “Consumers had long been expected to pull forward their holiday shopping to get ahead of any supply chain backlogs, economists say.”

Read more

January 10, 2022

Here’s a little story about a group called the Fed…

 In the 1950’s, then Fed Chair William McChesney Martin described the Federal Reserve as “the chaperone who has ordered the punch bowl removed just when the party was really warming up.”

 In 2020, the opposite was true. The Fed, along with fiscal policymakers, filled the stimulus punch bowl to the brim to keep the country from falling into a recession or depression. In November 2021, Fed Vice Chair Richard Clarida explained:

 “The COVID-19 pandemic and the mitigation efforts put in place to contain it delivered the most severe blow to the U.S. and global economies since the Great Depression. Gross domestic product (GDP) collapsed at a nearly 33 percent annual rate in the second quarter of 2020. More than 22 million jobs were lost in just the first two months of the crisis, and the unemployment rate rose from a 50-year low of 3.5 percent in February to a postwar peak of almost 15 percent in April 2020…The fiscal and monetary policy response in the United States to the COVID crisis was unprecedented in its scale, scope, and speed.”

Read more

January 3, 2022

 2021 was a fizzing mints-in-soda kind of year.

 Everything seemed to shoot higher – from COVID-19 cases and vaccinations to economic growth and global stock markets. Everything except for optimism. As the year came to an end, a CBS News poll found that 40 percent of Americans felt 2021 was mostly filled with sadness, although almost three out of four people polled said they were hopeful for 2022.

 As we head into the new year, let’s a look back at 2021. 

  • Vaccinations took off. At the start of the year, very few people were vaccinated against COVID-19. Despite issues with vaccine reluctance and availability, by the end of the year more than 58 percent of the world’s population had received at least one dose of a COVID-19 vaccine.
Read more

December 27, 2021

Investors were feeling bullish.

Last week, the Standard & Poor’s 500 (S&P 500) Index closed at a record high for the 68th time this year. That’s the second-highest number of record closes in a single year. The highest number occurred during 1995, when the S&P 500 had 77 record highs, reported Reuters. That was the year the Dow Jones Industrial Average passed 4,000 for the first time and then rose above 5,000, reported Wayne Duggan of Benzinga.

“The market deserves to celebrate. [COVID] brought death and dislocation, but we tend to pay too little heed to what didn’t happen. If vaccines hadn’t changed the pandemic’s trajectory, the U.S. would have suffered nearly 1.1 million additional deaths and 10 million more hospitalizations – according to an epidemiological model by the Commonwealth Fund cited this past week in the Journal of the American Medical Association,” reported Bill Alpert of Barron’s.

That may be the case, but investors were likely focused on expectations for consumer sentiment, economic growth and corporate earnings.


Read More

December 20, 2021

Stock and bond markets diverged.

Last week, the Bank of England surprised markets with a rate hike, its first in three years, and the Bank of Mexico raised rates more than expected. Both cited persistent inflation as the reason for the increases, reported Carla Mozée of Markets Insider.

In the United States, the Federal Open Market Committee (FOMC), which is the group that decides how the U.S. central bank (the Federal Reserve or Fed) will manage monetary policy, met last week and decided to become less accommodating more quickly.

With inflation at high levels and employment at full pandemic capacity, the Fed will take steps “to prevent higher inflation from becoming entrenched,” announced Fed Chair Jerome Powell. FOMC median projections suggest the Fed funds rate will rise from its current range (zero to 0.25 percent) in 2021 to 0.90 percent in 2022, and 2.1 percent by 2024.

Read More

December 13, 2021

Inflation met expectations.

When the Bureau of Labor Statistics released the Consumer Price Index (CPI) last week, it showed that inflation was at levels last seen in 1982. In November, prices were up 0.8 percent month-to-month and 6.8 percent year-to-year.

“It was the blowout, superhot inflation number that everyone was expecting—and it was met with a shrug,” reported Ben Levisohn of Barron’s. “The major indexes, for their part, rose a touch on Friday to finish what turned out to be a fantastic week: The S&P 500 gained 3.8% to hit a new high, while the Dow Jones Industrial Average rose 4.0% and the Nasdaq Composite gained 3.6%.”

The bond market’s response to the CPI was unexpected, as well. “Indeed, Treasury inflation-protected securities were saying price pressures in future years will be abating instead of getting worse,” reported Randall W. Forsyth of Barron’s.

Forsyth was referring to the breakeven rate, which is the difference in the yields of Treasuries and the yields of inflation-protected Treasuries with the same maturities. The breakeven rate is a measure of investors’ inflation expectations for the next five years. On Friday, the 5-year Breakeven Inflation Rate was 2.76 percent. That was below its November high of 3.17 percent.

Read more

December 6, 2021

Investors look to the future.

Last week, employment and manufacturing data confirmed that the United States economy continued to strengthen in November, but positive economic news was overshadowed by investors’ concerns about the spread of coronavirus and Federal Reserve policy.

Let’s start with the economic news.

More Americans were working. The Bureau of Labor Statistics (BLS) reported that unemployment dropped to 4.2 percent in November – a level the country wasn’t expected to achieve before 2024, according to Eli Rosenberg of The Washington Post. The labor force participation rate improved, too, meaning that more people are returning to work.

Read more

November 29, 2021

COVID-19 strikes again.

Coronavirus cases have been on the rise in Europe, climbing from about 700,000 new cases a week in September to 2.6 million a week in November, reported Richard Pérez-Peña and Jason Horowitz of the New York Times. As Thanksgiving approached, there was concern that travel and togetherness could increase the number of cases in the United States, too, creating stress on already taxed healthcare systems. Jamie Smyth and Caitlin Gilbert of the Financial Times explained:

“…what was expected to be a celebration has become fraught with danger in some Midwestern states, where vaccination rates are low and COVID-19 cases are rising rapidly after a summer lull…Nationally, cases have increased by nearly 30 percent since the beginning of the month…”

Financial markets took the fall surge in stride. They were less sanguine when news broke last week that a new variant of coronavirus, called “omicron,” had been identified in South Africa and was spreading.

Read more

November 22, 2021

Thinking about the possibilities.

The Standard & Poor’s (S&P) 500 Index finished last week slightly higher and has gained about 6 percent during the past 25 days; however, investors have curbed their enthusiasm. The S&P 500 hasn’t experienced a move of one percent or more in 25 trading days. That’s the longest period without a move of that size in about two years, according to a source cited by Avi Salzman of Barron’s.

It’s possible investors are taking time to think about the current mix of conditions and how the economy and financial markets may be affected. For example:


Read more

November 15, 2021

Economists like to joke that inflation is just right when no one notices it.

Last week, investors noticed it. The Consumer Price Index (CPI), which is a measure of inflation, rose 0.9 percent in October and 6.2 percent over the last 12 months, according to the Bureau of Labor Statistics. (When volatile food and energy prices were excluded, the CPI was 4.6 percent for the period.)

That’s the highest level for inflation in 30 years, according to The Economist, and well above the United States Federal Reserve’s policy goal of two percent inflation over the longer term.

Uncertainty about the nature of inflation has left the U.S. Federal Reserve wedged in an uncomfortable policy position. The Economist explained: 

“As inflation has accelerated economists and officials have debated whether it is a transitory phenomenon—reflecting overstretched supply chains—or a more persistent problem. It is far more than an academic debate. If inflation is short-lived, the right move for the Federal Reserve would be to look through it, aware that jacking up interest rates may do more harm than good. If, however, inflation is stubbornly high, the central bank is duty-bound to tame it,”

 

Read More

November 8, 2021

The Markets

Feeling bullish…

Investor bullishness ticked higher last week on all four investor sentiment gauges tracked by Barron’s. Investor optimism may have been fanned by positive financial and economic news. For example, last week:

The jobs report was better than expected. Last week, the Bureau of Labor Statistics (BLS) reported that 531,000 new jobs were added in October, lowering the unemployment rate to 4.6%. In addition, the employment numbers for August and September were better than previously reported. The BLS Employment Diffusion Index measures the breadth of employment gains across the economy. It rose from 63.6 in September to 71.8 in October for private industry, and from 57.3 to 70 in manufacturing. The increase suggests that job gains were spread across diverse industries rather than concentrated in specific ones.

Read more

November 1, 2021

The Markets

The road to recovery is slow and bumpy.

Last week, we learned that economic growth slowed in the third quarter as a new wave of COVID-19 surged across the United States, reported The Bureau of Economic Analysis. Gross Domestic Product (GDP), which is the value of all goods and services produced in the United States, increased by 2 percent annualized in the third quarter.

Consumer spending dropped sharply during the period. The change may reflect the limited availability of goods due to supply-chain issues, a reluctance to pay higher prices, or a drop in disposable personal income.

Read More

October 25, 2021

The Markets

It’s MESSI!

No, this commentary is not about Lionel Messi, the Argentine soccer phenom who is widely regarded one of the greatest footballers of all time. However, it is about something that economists say may be as rare as Messi’s talent: Moderating Expansion with Sticky Supply-driven Inflation (MESSI).

You can see why we prefer the acronym.

MESSI is a type of inflation that occurs when “strong, but cooling demand is met by constrained, but accelerating supply, leading to transitory, yet sticky inflation.”1 The coronavirus pandemic may have produced just the right circumstances, according to Gregory Daco of Oxford Economics.

Read More