We have written many articles and commentaries forecasting interest rates. The analysis has used prior and current inflation and economic activity. Additionally, we have looked at market data on inflation expectations, Fed Funds futures, and other factors that influence interest rates. Today, we add an unorthodox factor to the list: cash cows. This article introduces a unique way to imply where dividend investors think interest rates will be in the future. The impetus for this article came from a recent SimpleVisor Friday Favorites article in which we reviewed the Campbell Soup Company (CPB ..read more

The S&P 500 index is a critical benchmark for the U.S. equity market, and its performance often dictates investor sentiment and decision-making. Between November 1, 2022, and September 6, 2024, the S&P 500 experienced a significant rally but not without volatility. Currently, investors have very mixed views about where markets are heading next as concerns of a recession linger or what changes to monetary policy will cause. However, as investors, we must trade the market we have today. Therefore, using technical analysis, we can explore bullish and bearish market dynamics to assist us i ..read more

It certainly seems that technological advances make our lives better. Instead of writing a letter, stamping it, and mailing it (which was vastly more personal), we now send emails. Rather than driving to a local retailer or manufacturer, we order it online. Of course, we mustn't dismiss the rise of social media, which connects us to everyone and everything more than ever. Economists and experts have long argued that technological advances drive U.S. economic growth and productivity. As innovations emerge, they play a crucial role in shaping the economy, improving efficiency, and enhancing prod ..read more

Part One of this article described the burgeoning bull steepening yield curve environment and what it implies about economic growth and Fed policy. It also discussed the three other predominant types of yield curve shifts and what they suggest for the economy and Fed policy. Persistent yield curve shifts tend to correlate with different stock performances. With the odds growing that a long bull steepening may be upon us, it's incumbent upon us to quantify how various stock indices, sectors, and factors have done during similar yield curve movements. Limiting Losses With Yield Curve Analysis St ..read more

Since the end of the "Yen Carry Trade" correction in August, bullish positioning has returned with a vengeance, yet two key risks face investors as September begins. While bullish positioning and optimism are ingredients for a rising market, there is more to this story. It is true that "a rising tide lifts all boats," meaning that as the market rises, investors begin to chase higher stock prices, leading to a virtual buying spiral. Such leads to an improvement in market breadth and participation, which supports further price increases. Following the August decline, the chart below shows the im ..read more

In a recent discussion with Adam Taggart via Thoughtful Money, we quickly touched on the similarities between the U.S. and Japanese monetary policies around the 11-minute mark. However, that discussion warrants a deeper dive. As we will review, Japan has much to tell us about the future of the U.S. economically. Let's start with the deficit. Much angst exists over the rise in interest rates. The concern is whether the government can continue to fund itself, given the post-pandemic surge in fiscal deficits. From a purely "personal finance" perspective, the concern is valid. "Living we ..read more

The level of U.S. Treasury yields and the changing shape of the Treasury yield curve provide investors with critical feedback regarding the market’s expectations for economic growth, inflation, and monetary policy. Short- and long-term yields have recently fallen, with short-term maturities leading the charge. The changes result in what bond traders call a bull steepening yield curve shift. The shift is due to weakening economic conditions, moderating inflation, and the increasing likelihood that the Fed will lower rates. Yield curves are essential indicators that bond investors closely follow ..read more

As noted in this past weekend's newsletter, following the "Yen Carry Trade" blowup just three weeks ago, the market has quickly reverted to more extreme short-term overbought conditions. Note: We wrote this article on Saturday, so all data and analysis is as of Friday's market close. For example, three weeks ago, the growth sectors of the market were highly oversold, while the previous lagging defensive sectors were overbought. That was not surprising, as the growth sectors of the market were the most exposed to the "Yen Carry Trade. " We saw much the same in the Risk Range Analysis ..read more

The latest retail sales report seems to have given Wall Street something to cheer about. Headlines touting resilience in consumer spending increased hopes of a "soft landing" boosting the stock market. However, as is often the case, the devil is in the details. We uncover a more troubling picture when we peel back the layers of this seemingly positive data. Seasonal adjustments, downward revisions, and rising delinquency rates on credit cards and auto loans suggest a more cautious view. The consumer—the backbone of the U.S. economy—may be in more trouble than the headline numbers indicate. The ..read more

Profitable bond trading opportunities arise when your expectations about Fed policy differ from those of the market. Therefore, with the Fed seemingly embarking on a series of interest rate cuts, it behooves us to appreciate how many interest rate cuts the Fed Funds futures market expects and over what period. Equally important, Fed Funds futures help us assess the market's economic growth and inflation expectations. Currently, Fed Funds futures imply the Fed will start cutting rates in September and reduce them by 2.25% to 3.09% in early 2026. From that point, the market expects the Fed to sl ..read more