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Category Archives: Economy and Markets

Five Forecasters: Few Warning Signs

The Five Forecasters favor the continuation of the current economic expansion and bull market. The Five Forecasters are five indicators that, collectively, have historically signaled increasing fragility of the U.S. economy and a transition to the late stage of the economic cycle, with increased potential of an oncoming recession. Although bear markets (defined as a 20% or more drop in the stock market) are not always accompanied by recessions, more often than not they come together. As a result, we believe these indicators can be used to give some advance warning of a bear market.

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The Lowdown on the Shutdown: The Impact on the Economy and Federal Reserve

With the shutdown and debt ceiling debate now in the rear view mirror, the market’s attention– and possibly the Federal Reserve’s (Fed) as well– will likely shift to the performance of the private sector economy here in the fourth quarter of 2013 and in the first quarter of 2014. We continue to expect…

The Lowdown on the Shutdown

Many Happy Returns

The phrase “many happy returns” is often used for a birthday greeting and meant to augur a long, successful life. More broadly, the term can be used as a greeting to offer hope that a festive event would repeat many mort time in the future. The current bond market environment can hardly be described as festive, but the month of September has bond investors exclaiming…

Bond Market Perspectives

Dawning of a New Era?

Financial markets have reacted favorably to the news that Summers is no longer a candidate for several reasons: Most importantly, Yellen is more likely to continue the same policy path as Bernanke, and markets are embracing the certainty, even as the uncertainty around the Fed’s quantitative easing (QE) program ramps up…..

Dawning of a New Era?

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Data shows that the economy is not booming, the labor market is still struggling, and the Fed’s preferred measure of inflation has decelerated in recent months. All this suggests that although there is not a clear cut economic case for the Fed to begin slowing QE at the Septemeber 17-18 FOMC meeting, the overall economy…

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Stocks Likely to Focus on Domestic Over Foreign Policy in September

The markets were most focused on an impending military strike on Syria last week. While prospects for an imminent strike have faded, the likelihood of military action in the near future remains. Unfrotunately, the past offers us many periods of military actions. Looking back at these can help us draw parallels and gain perspective on the most likely outcome for the markets….

Pre-Strike Stock Market Rallies

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The upward revision to second quarter gross domestic product (GDP) garnered a great deal of market attention last week (August 26-30, 2013). The report, released on Thursday August 29, revealed that second quarter GDP – initially reported in late July 2013 as a 1.7% gain…

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Trading Partners

Deficit Distraction

In the 12 months ending July 2013, the federal government spent $3.4 trillion and took in $2.7 trillion in revenues, making the federal deficit (revenues less spending) about $725 billion, the smallest deficit recorded since late 2008. At just 3.5%, the deficit as a percent of nominal gross domestic product (GDP) over the past 12 months was also the smallest since late 2008, and stands in sharp contrast to the…

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Deficit Distraction

Two Bears and a Bull

The month of August has not been friendly to investors in any of the major asset classes. Stocks have dipped and bond yields have climbed, pushing bond prices lower. And, with the rise in inflation to 2.0% (as measured by the Consumer Price Index), there is greater purchasing power loss associated with holding cash or money market investments…

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Two Bears and a Bull

Exporting Good Old American Know-How

The United States has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s. Although the trade deficit narrows during recessions — imports typically fall faster than exports during a recession — the trade gap has increased over time, and currently stands at around 3.5% of gross domestic product (GDP) [Figure 1]. This large and persistent trade deficit acts as a drag on overall GDP growth, since…

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Exporting Good Old American Know-How