The EconomyConsumer sentiment is being driven by inflation and stocks but is worse than warranted. Consumer prices increased at an 8.6% annual rate in May, and many Americans are  now starting to forgo some purchases and outings. Consumers are also suffering through a reverse-wealth-effect as stock prices have  dropped and there is concern about home prices. The stock market is …

EquitiesStocks had a great week. The market seemed to like Powell’s acknowledgement of the possibility of a recession, if only because it might mean less aggressive rate increases in the future. The market seems to be interpreting recent signs of slowing growth as a reason for the Fed to potentially be less aggressive. The thinking really seems to be that we …

Bonds and the DollarMay was the first time in 10 months that corporate bonds had a positive return. Previously, higher inflation led to belief in a more aggressive Fed and that resulted in higher yields (lower bond prices). In May, investors seemed to decide that investment grade bonds offered good value. On Friday, the dollar rose. This was the result …

InflationInflation is north of 8% and unemployment is 3.6%. The last time inflation went above 8% and unemployment went below 4% was 1951. The last time the U.S. saw a combination of high inflation and low unemployment like today’s was seven decades ago. That makes it particularly challenging for the Federal Reserve to curb inflation while avoiding a recession. Highlights …

MarketsThe Fed is using tools to bring excess demand into better balance w/ constrained supply. It will be challenging to remove accommodation to get inflation under control while sustaining healthy labor market conditions. Some of the issues weighing heavier for the markets last week were: the Fed policy, Russia, China’s new lockdowns and growth slowing.Highlights Dow suffers longest losing streak …

StocksWith ~69% of S&P 500 companies having reported (through Thursday of last week), Q1 earnings had grown by more than 10%.  In April, the DJIA was down 4.9%, S&P 500 was down 8.8%, and Nasdaq dropped 13.3%. These were the biggest monthly declines since March 2020 for the DJIA and S&P, and the largest for the Nasdaq since Oct. 2008. …

Stocks Earnings growth for the year is predicted to be 9.8% (up from 7.1% at start of year). Since 1980, the market has been down through April for the last 15 years. The average May through September return in those years is -1.5% vs. +8% in the other years. Highlights Net profit margins are expected to be 12.1%, above the …

Stocks The stock market has had significant recovery. The S&P was down 13% at one point this year, but recovered to ~4.9% in Q1. Data continues to show an inflation problem along with supply chains challenges (including China).Highlights 8 of last 11 tightening cycles have led to recession With inflation so high, this tightening will be aggressive Wages aren’t keeping …

Oil Headlines designed to get clicks have produced a panic, shifting from fear of having too much to having too little. There has been panic buying in the market. Highlights Oil settled at $115.68 – highest since 2008 Biggest weekly gain on record – $24.09 or 26.3% Natural gas up 12.2% for week (to $5.016) April gasoline was up 23.3% …

OilHeadlines designed to get clicks have produced a panic, shifting from fear of having too much to having too little. There has been panic buying in the market. Highlights Oil settled at $115.68 – highest since 2008 Biggest weekly gain on record – $24.09 or 26.3% Natural gas up 12.2% for week (to $5.016) April gasoline was up 23.3% for …