There are things you can replace
And others you cannot
The time has come to weigh those things
This space is gettin’ hot
You know this space is gettin’
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Blog Archives
GDPtopia
Last week, the GDP report for the 4th quarter was released as well as the Fed’s favorite inflation index, the Personal Consumption Expenditures price index (PCE). The Fed should be very pleased with what the reports revealed and how it has defied the overwhelming consensus that a hard landing was necessary to break the back of inflation.
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Peek-A-Boo Powell
Perhaps Powell’s pivot was highly influenced by having access to the Fed’s favorite inflation indicator, the Personal Consumption Expenditure Index (PCE), well ahead of its official release last Friday. As this headline from the Wall Street Journal shows, the index went into negative territory,
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Powell Pivot III: Too Little Too Late for Overleveraged Apartment Owners?
Powell did it for the third time. He proved for the third time that you should listen to him carefully until he does something completely different, and then you should listen to him again. After raising rates aggressively starting in April 2022, after he had said that the Fed wouldn’t raise rates until the end of 2023 at the earliest,
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Breaking Bad? (or Good?)
Last week may have finally been the week when the Fed aligned with markets that the peak in rates may be in for this cycle. The Fed held rates in what was initially categorized as a “hawkish pause.” It was during the Jay Powell press conference that the market started to believe that maybe the Fed was done raising rates.
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Dude, Where's My Recession? Only Time Will Tell
I was definitely in the camp that once the yield curve inverted, we were headed for a recession within a year or so. The spread between the 10-year Treasury and 2-year Treasury yields went negative (inverted) in early July 2022.
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The Braveheart Fed
I must say that when I read this tweet last week, I felt heard, listened to, and understood. It was cathartic in a way.
I know I’m being a bit melodramatic, but there are so many cross-currents in the economy that it has made forecasting quite challenging.
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More Ackman: We Aren't in Kansas Anymore
I have written continuously over the last year or so about critical yields for the 10 and 2-year Treasuries such that if they were breached, the probability of them going higher would be quite elevated.
Looking at the following 10-year Treasury chart,
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Jackson Hole and a Future Toll?
Fed Chairman Jay Powell spoke last Friday at the Jackson Hole conference for Central Bankers. He was pretty clear that the Fed would remain vigilant in its fight against inflation.
The economy is doing better than the Fed expected,
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Zip
Last week the CPI report was released. One can see that shelter is now by far the biggest component of inflation. Non-Housing Services are growing at a moderate rate while Core Goods prices are declining.
This chart shows how CPI excluding shelter has been moderating quite significantly,
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