The Fed’s response to regional bank woes, and the resulting expansion in the Fed’s balance sheet, has led many to hope that the Fed’s “villainous”, liquidity draining days are numbered, and that they will soon emerge as a market hero once more, supporting prices with added liquidity.
The Weekly Edge
“Brain Damage” feels particularly appropriate to describe a week of frightening headlines and tumultuous markets that surprisingly finished with the S&P 500 higher.
Bullet with Butterfly Wings: Higher Rates Starting to Bite
We all heard the phrase “when the Fed raises rates, something breaks” so much in the past year that this aphorism nearly became stale, mostly given the backdrop of renewed calm and optimism in markets to start 2023.
In a brisk about-face in February, the bond market decided to agree with the Fed. Recent unexpectedly strong economic data knocked out expectations for coming Fed easing that were far too benign, resulting in yields now fully adjusting to the Fed’s published path of interest rates from December.
Running Up That Hill: Confronting Earnings Hills
Be runnin' up that roadBe runnin' up that hillBe runnin' up that buildin' - Running Up That Hill, Kate Bush We have Netflix and TikTok to thank for the youthful pop culture resurgence of the 1985 classic Kate Bush song “Running Up That Hill”, but it’s a great,...
No Land Before Time
Note: This piece is not about friendly adolescent dinosaurs going on a Hero’s Journey, but it is a great pun to talk about the limitations of recent debates about economic “landings”. In the span of just two months, the dominant market narrative has shifted from...
The Price You Pay: 4Q22 Earnings Update
In this week’s Edge, we are taking stock of the recent earnings trends and guidance provided by U.S. companies, and then asking ourselves if these measures and management expectations justify the prices investors are paying today?
Too Much Love Will Kill You: Velocity and Vulnerabilities
Respect the tape. That’s the message from market technicians (those who analyze price and volume data in markets) after this week’s rally. The ebullient response by equities to the Fed’s seemingly dovish press conference resulted in meaningful “breakouts” and surges in momentum in many stock indices.
The Bond Market is Hearing But Not Listening
Every partner, parent, or friend knows that there is a big difference between hearing and listening. Hearing is just the passive perception of sound. Listening is the active absorption of sound.
Communication breaks down when we hear but we don’t listen.
The Weekly Edge: January 20, 2023
The question as we look to the remainder of 2023 is: has enough changed in the macro environment that the recent relief rallies in last year’s losers can continue?