In an op-ed for the Washington Post on November 5, 2010, Ben Bernanke did a victory lap, praising the Fed’s efforts in stemming the financial crisis. In the article, he discusses how QE and other Fed policies eased financial conditions, bolstering investor confidence. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.  If Bernanke wants credit for his Fed policies that boosted stock prices, he should als ..read more

Over the last two weeks, the bullish sentiment index has reversed from extreme greed to fear. The composite net bullish sentiment index, comprised of professional and retail investors, fell from 38.15 to 9.9 in two weeks. The previous drop between July and October last year was similar and marked the bottom of the correction. While the bullish sentiment index can indeed fall further, what is notable is the sharp reversal of market “exuberance” in such a short span. However, as discussed in “Just A Correction,” there was a significant gap between buyers and sellers. “However, at some point, f ..read more

The latest retail sales data suggests a robust consumer, leading economists to become even more optimistic about more robust economic growth this year. To wit: “It has been two years since forecasters felt this good about the economic outlook. In the latest quarterly survey by The Wall Street Journal, business and academic economists lowered the chances of a recession within the next year to 29% from 39% in the January survey. That was the lowest probability since April 2022, when the chances of a recession were set at 28%. Economists don’t think the economy will get even close ..read more

Most NFL general managers (GMs) are optimistic and displaying overconfidence today as they prepare for tomorrow’s NFL draft. The draft is a once-a-year opportunity for GMs to acquire talent. Like investors, GMs often think they are smarter than their competitors, aka the market. Yet, they frequently have similar mindsets and follow the same narratives that drive their competition.    As we will share, overconfidence and groupthink among football GMs and investors are behavioral flaws that often harm performance. Having the tools and strategies to mitigate our behavioral traits is ext ..read more

Is this just a correction after a strong bullish advance from November, or is the bull market ending? If you read some of the headlines, you would suspect the latter. As noted by MarketWatch last week: “For the first time since early November 2023, less than 30% of S&P 500 stocks are trading above their 50-day moving average — a clear indicator of the current poor market’s breadth. This significant drop from the 85% observed in late March and 92% at the beginning of January highlights a dramatic reversal in market dynamics. The 50-day moving average is often seen as a barometer for the sh ..read more

The latest National Federation of Independent Business (NFIB) survey was an economic warning that departed widely from more robust governmental reports. In a recent analysis of small businesses, we discussed the importance those business owners play in the economy. “It is crucial to understand that small and mid-sized businesses comprise a substantial percentage of the U.S. economy. Roughly 60% of all companies in the U.S. have less than ten employees. Small businesses drive the economy, employment, and wages. Therefore, the NFIB’s statements are highly relevant to the economy’s current ..read more

We recently wrote Japan’s Lost Decades to appreciate better why Japan’s GDP is smaller than it was in 1995 and why it took 35 years for its stock market to set its recent record high. Many pundits claim the U.S. is following Japan’s path. The path includes a stagnant economy, massive government debt, and a central bank that must dominate financial markets to keep the economy and financial markets afloat. There is merit to that opinion. The U.S. government has excessive debt and is increasingly negligent in managing its budget. Also, the nation’s economic growth rate has been trending lower for ..read more

Economic “reflation” is becoming the next bullish narrative as equity valuation increases continue to outpace earnings gains, at least according to Gold Sachs and Tony Pasquariello. “If GS is correct on the big calls, the macro backdrop is set to remain friendly: the US economy should continue to grow nicely above trend — picking up speed as the year moves along — with three adjustment rates cuts along the way.  to not obscure the moral of that story: the Fed is set to ease policy … into an upswing.  while Fedspeak this week had a somewhat hawkish bent, the house view for 2024 remai ..read more

Is immigration why employment reports from the Bureau of Labor Statistics (BLS) continue defying mainstream economists’ estimates? Many are asking this question as the U.S. experiences a flood of immigrants across the southern border. Concurrently, many young college graduates continue to complain about the inability to receive a job offer. As noted recently by CNBC: The job market looks solid on paper. According to government data, U.S. employers added 2.7 million people to their payrolls in 2023. Unemployment hit a 54-year low of 3.4% in January 2023 and ticked up just slightly to 3.7 ..read more

Having risen by about 40% since last October, Gold is on a moonshot. Many investment professionals consider gold prices to be a macro barometer, measuring the level of anxiety in the economy, inflation, currency, and geopolitics. Therefore, we must investigate what is and isn’t driving the price of gold higher. The Divorce Between Gold and Real Yields To help us figure out what may be driving the momentum in Gold, it is worth first considering that a trusty relationship that largely explained the movement in gold prices broke down about two years ago. The graph below, courtesy of Matt Weller ..read more