Tag: Inflation

A chart of the Fed funds rate and how rate hikes are slowing down earnings growth.

Earnings Growth Slowing As Interest Rates Rise


With Q3 earnings season in the rear-view mirror, we can now say that earnings growth is slowing. Over the last 4 quarters we have growth rates of: 2.1%, 6.5%, 6.5%, and 4.1%. Federal Reserve rate hikes and quantitative tightening are causing earnings growth to slow as you can see in the chart below. The grey Read More »

Border Adjustment Tax DOA as Retailers and Traders Celebrate Victory


Republicans have officially given up on trying to pass a border adjustment tax to even the playing field with our trading partners. The Retail Industry Leaders Association celebrated the news and said they are now ready to get on-board with the President’s tax reform. The retail sector, and stock traders, won a significant victory Thursday Read More »

US dollar chart plunged after FOMC announcement on July 26, 2017.

FOMC Announcement Pushed US Dollar Down Big Time


The dollar did a big drop today after the FOMC announcement left rates unchanged. The Federal Reserve said the reduction of the balance sheet will begin relatively soon. I think relatively soon means September 2017. The Fed seemed to indicate that “gradual” policy tightening will continue. The Federal Reserve will begin winding down the stimulus Read More »

Corporate Bond Yields Spread Falling… Another Bullish Indicator


Corporate bond yields spreads are falling which suggests there is a low default risk. Using Fred and Moody’s we can chart the spread between lowest investment grade (Baa) and equivalent 10-year Treasury yields. Corporate Bond Yields Spread Chart Corporate bond spreads are at there lowest point since 2008. This suggests that markets are pricing in Read More »

Janet Yellen Testimony Economy Strong Enough For Rate Hikes


The US economy is healthy enough to absorb gradual rate increases and the reduction of the Federal Reserve’s balance sheet, Fed Chair Janet Yellen testimony before Congress on July 12, 2017. Federal Reserve Chair Janet Yellen told Congress on Wednesday that the bank hopes to keep raising a key interest rate and also intends to Read More »

Jolts Job Openings Down But Hiring Up


The JOLTS Job Openings report showed U.S. companies posted fewer job openings in May but hiring picked up and people are quitting their jobs — both bullish signs for the economy. New government statistics show American companies have made progress filling their record number of job openings, as hiring rose in May while the amount Read More »

Interest Rate Policy May Be Too Tight As Evidenced By Inflation


The Federal Reserve shouldn’t be tightening policy with the evidence so clear that it’s falling well short of its inflation mandate. The interest rate policy is wrong because their math is wrong. Right now the Fed’s inflation goal is 2 percent. Why so low? Fed rate hikes are keeping inflation too low and possibly will Read More »

inflation rate falling

Why the Inflation Rate Could Crash the Economy


The inflation rate is too weak for a June Fed rate hike. According to a report in Reuters (link above), inflation expectations are falling fast. Inflation Rate The reason inflation is falling is from Fed rate hikes. That’s what hikes do. The Federal Reserve usually hikes rates into an overheated economy with prices running rampant. Read More »

Stock Market at All time Highs! Are We In a Giant BUBBLE?


With the stock market hitting all-time highs, everybody wants to know if we are in a giant bubble. You can’t trade and make money if you’re not in the market. If the fear that we are in a bubble is keeping you out, then you’re not making money. The honey badger doesn’t care. The honey Read More »

Inflation Expectations On The Rise Shifts Aggregate Demand Outward


Inflationary expectations are the expectations that consumers have concerning future inflation. If buyers expect higher prices in the future, they increase their demand in the present. This shifts the aggregate demand curve outward (to the right) which is good for the economy. For example, if the price of a house is expected to be higher Read More »

Here Comes Inflation FINALLY! Traders Focus On Earnings


We have enough data to say that inflation is finally trending higher. In case you are wondering why inflation moving higher is important, please review this. The less volatile sticky CPI confirms the uptrend. ObamaCare has exploded the cost of medical care higher. Medical care commodities, which are prescription and non-prescription Read More »

A supply and demand chart showing equilibrium at the center axis of where supply and demand cross.

The Aggregate Supply-Aggregate Demand Model


Looking at the aggregate supply (AS), aggregate demand (AD) model, we can see where the US economy is currently at in the economic cycle. It is critical that traders and investors understand where we are at in the business cycle so as to be in on the right side of the trade. Timing Bull/Bear cycles Read More »