Rising Rates Create Tighter Financial Conditions

by Laura Ehrenberg-Chesler on May 17, 2018

in Fed policy,interest rates

From the WSJ today:

The yield on the 10-year Treasury note climbed to 3.082% on Tuesday, breaking above a 2014 peak to settle at its highest level since 2011. The rise in that benchmark stands to lift borrowing costs for everyone from consumers to corporations.

Meanwhile, the WSJ Dollar Index, a measure of the U.S. currency against 16 peers, climbed to its highest level of the year on Tuesday, reversing a recent decline. A stronger dollar makes it more expensive for foreign governments and companies to repay dollar-denominated debt.

As if that’s not enough, short-term bond yields have been rising, oil and gasoline prices are hovering around multi-year highs, and stocks have been volatile. The S&P 500, which had been on a winning streak of late, finished Tuesday 5.6% below their record highs.

Together, these market moves are starting to restrict the flow of money through the financial system, as The Wall Street Journal’s Morning MoneyBeat newsletter noted on Wednesday. After years of loose monetary policy and calm financial markets, the shift toward tightening financial conditions may act as an additional force restraining economic growth.”

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Share Buybacks Steady Market

by Laura Ehrenberg-Chesler on May 10, 2018 in Earnings

The new tax code overhaul, signed into law in late 2017, has encouraged companies to repatriate over $2 trillion in overseas cash. Some of that cash has gone into research and development as well as capital equipment purchases. But, a lot of that cash has gone into share repurchases. These buybacks have helped to steady […]

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Public Pension Plans Present Problems

by Marilou Moursund on May 8, 2018 in politics

As we see over and over, governments don’t have to follow the same rules as the private sector.  Public pension plans are very underfunded according to this Wall Street Journal article titled “Pension Funds Still Making Promises They Probably Can’t Keep”.  From the linked article: But government officials seeking to make their investment targets more […]

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The IMF’s World Economic Outlook April 2018

by Marilou Moursund on April 19, 2018 in Economic Indicators

The International Monetary Fund (IMF) published their economic outlook today, and the main conclusion is that the global upswing that began in mid-2016 has become broader and stronger.  From the linked report: World growth strengthened in 2017 to 3.8 percent, with a notable rebound in global trade. It was driven by an investment recovery in […]

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Ed Yardeni on Tariffs and Blockchain

by Marilou Moursund on March 15, 2018 in currencies

We have all heard about the wild ascent and subsequent fall in the price of Bitcoin, and shortening cryp tocurrency to crypto in your conversation is a sure fire way to sound cool.  However, the underlying technology driving Bitcoin, called blockchain, has many theoretical uses.  From Yardeni Research’s Morning Briefing today: 1) Blockchain basics. We’ve […]

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The Anniversary of the 2009 Market Low

by Laura Ehrenberg-Chesler on March 6, 2018 in capitalism

March 6, 2009 was the market low during the era if the financial crisis. Intra-day, the S&P 500 dipped to 666. Some of the headlines from that period were as follows” “Market’s 7-day rout leaves U.S. reeling” “Worst Week Ever for Stocks” “Mounting Fears Shake World Markets” “FORCLOSURES” “The Week That Changed American Capitalism” We […]

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Warren Buffett Invests Like a Girl

by Marilou Moursund on March 1, 2018 in Investment Strategies

In this Bloomberg article titled “The Next Warren Buffett Will Be A Woman“, the author lays out research that shows how women invest and compares their personality traits to those of Warren Buffett.  The author contends that women are more patient, not prone to panic, and have less of a tendency to be overconfident.  These […]

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Digitization and Good Policies can drive Productivity Gains

by Laura Ehrenberg-Chesler on February 26, 2018 in Economic Indicators

From the “Wall Street Journal” today: “Digitization isn’t the only factor economies could embrace to unlock productivity growth. The report calls for policies to encourage education, businesses investment and the purchasing power of low-income consumers. Rising income inequality since the mid-2000s has been a constant, if moderate, drag on demand, according to the report. If […]

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Bonds Sell Off after Release of Fed Minutes

by Marilou Moursund on February 21, 2018 in Bonds

The yield on the 10 year Treasury jumped from 2.88% this morning to 2.96% this afternoon after the Federal Reserve released its minutes from the January meeting.  Fed officials increased their outlook for both growth and inflation in January.  From the linked Wall Street Journal article: Fed officials late last month believed the economy was […]

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Falcon Heavy Rocket Flies Like an Eagle – courtesy of Stratfor

by Marilou Moursund on February 7, 2018 in Space exploration

The SpaceX launch of its Falcon Heavy rocket yesterday is very exciting news for the future of space exploration.  From the linked Stratfor article: SpaceX’s process of disrupting the space industry remains long and prosperous. The private company has successfully launched its Falcon Heavy rocket, sending its “payload” spacecraft, which in this case carries founder Elon […]

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