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Fed Funds

Apr 20 2023

The Return Of Returns

  • Apr 20, 2023

A distinguishing feature of fixed income securities is that the expected return on a bond over its remaining lifetime is known with considerable certainty at the time of purchase. This characteristic can be a blessing or a curse, the negative aspect coming into play during an asset price bubble. Equity investors can justify almost any price as they dream of boundless riches arising from the bubble’s driving theme, limited only by their imagination. However, a bond’s yield to maturity is known at the time of purchase and this is the return investors in aggregate will earn. Even during the euphoria of an asset bubble, the expected outcome - the return of par value at maturity - is also the best-case outcome, and that is where our story begins.

Apr 13 2023

Checking In On The Rally At The Six-Month Point

  • Apr 13, 2023

Yesterday was the six-month anniversary of the bear market low of 3,577.03 in the S&P 500. We think it’s unlikely the moderate upswing since then represents a new cyclical bull market. However, with the evidence still weighing in at Neutral, we’re not betting the farm on that opinion.

Apr 06 2023

Research Preview: Oh Bond Pain

  • Apr 6, 2023

Here we evaluate the returns of fixed-income ETFs since the Fed began its boosting campaign last March; for many mainstream offerings, the picture is not a pretty one. We recap the pain felt by investors in conventional fixed-rate bond funds.

Mar 07 2023

Inadvertent Easing?

  • Mar 7, 2023

Sometimes, a sharp upside reversal in the stock market will correctly anticipate future improvement in monetary and liquidity conditions. That was the case with the powerful up-leg that sprang from the market’s 2018 Christmas Eve bottom.

Feb 07 2023

1966-67: When The Yield Curve “Failed”

  • Feb 7, 2023

Given the tendency of economists and strategists to dismiss the message of an inverted yield curve, it’s surprising there’s been no scrutiny of the “dog that didn’t bark”—the inversion of 1966. That’s the last time an inverted curve did not lead to a recession.

Dec 07 2022

Goodbye Inflation, Hello Recession?

  • Dec 7, 2022

Unlike the five prior cycle peaks, this year’s inflation peak materialized during an ongoing economic expansion. That implies the “post-peak” monetary policy has never been tighter than today—making a soft landing even more improbable.

Dec 07 2022

Fed Funds Rate Above The CPI—Inflection Point Likely

  • Dec 7, 2022

Stock market bulls hope for an end to the tightening cycle in the not so distant future. However, the last two rounds didn’t end until the fed funds rate was raised above the prevailing rate of CPI.

Nov 18 2022

How This Year’s Inflation Peak Differs From Its Predecessors

  • Nov 18, 2022

Our studies of economic and stock market history are meant to provide perspective, not an investment roadmap. But occasionally a current trend will resemble the past so closely it’s eerie.

Take the current inflation cycle. If (as we believe) June’s CPI inflation rate of 9.1% represents the peak for this business cycle, then many of its characteristics have lined up almost perfectly with the “average” of past inflationary episodes.

Oct 07 2022

Past Pivots Prompted By Politics

  • Oct 7, 2022

We scrutinized the typical path of money growth during the four-year presidential election cycle, and found that it typically tends to bottom out in October of the midterm year! The cycle says a monetary pivot is imminent, and the average pattern traced out by M2 suggests an acceleration in the growth rate of about 2.5% leading up to the presidential election. 

Sep 16 2022

Labor: Snatching Defeat From The Jaws Of Victory

  • Sep 16, 2022

This year it’s been popular to say the Fed will hike interest rates until it “breaks something.” Has that not already happened? Pull up charts of the Japanese yen, the British pound, and the euro, among others. And stateside, the Fed has broken one of economists’ favorite toys: the Phillips Curve.

Feb 05 2022

Danger For Discretionary?

  • Feb 5, 2022

It’s been so long since investors have faced a serious Fed tightening episode that they may have forgotten a helpful rule of thumb: An initial hike in the fed funds rate is usually a good excuse to dump some Consumer Discretionary stocks. 

Oct 07 2020

Remember The Yield Curve?

  • Oct 7, 2020

It would be a mistake to ignore (as most pundits will) this important forecasting tool until the next time it threatens to invert. The level and direction of the yield curve provide helpful information throughout the entire economic cycle.

Feb 07 2020

The Alternate Ending?

  • Feb 7, 2020

After last year’s spectacularly successful pivot following the December 2018 plunge, the thinking is that future rate hikes are the bull market’s only threat. Perhaps that will be the case; the belief is certainly well-supported by postwar U.S. economic history, but it also reveals a shocking lapse in short-term memory.

Apr 05 2019

A Confidence Game

  • Apr 5, 2019

Several consumer confidence gauges plunged in the wake of the Q4 market decline (as expected), and then rebounded in a lagged response to the stock market recovery (again, as expected). But March saw the largest one-month drop in consumers’ assessment of their “Present Situation” since 2008.

Oct 05 2018

Rates Are Already Clobbering Consumer Stocks

  • Oct 5, 2018

“Three steps and a stumble” was the old rule of thumb for timing the impact of Fed tightening on the stock market.

Jun 07 2018

What The Curve Does And Doesn’t Tell Us

  • Jun 7, 2018

The gap between the 10-year Treasury yield and the federal funds rate has narrowed sharply in the last year but remains a long way (~110 basis points) from inverting.

Dec 07 2017

The Chart The Fed Forgot

  • Dec 7, 2017

The Fed has long claimed itself to be “data dependent” while providing less and less information on those data points it considers most relevant. We can’t know what’s on that list, but we certainly know what isn’t: the ISM Manufacturing Composite, which (prior to the current cycle) provided an excellent gauge of the Fed’s policy bias.

Jul 08 2016

Discretionary: Is The Top Finally In?

  • Jul 8, 2016

Sector swings have been wild enough thus far in 2016 that Consumer Discretionary’s relative weakness has drawn little commentary.

Oct 07 2015

Sentiment, The Economy & The Fed

  • Oct 7, 2015

We wrote in the January book that 2015 would serve up no shortage of excuses for the Fed to hold off on tightening all year. Whatever window the Fed may have had is now closed.

Sep 10 2013

Data Dependency—September Taper Still Likely

  • Sep 10, 2013

More upside surprises are still likely and, despite the disappointing jobs report, the overall economic picture still supports a September taper. The improving economic picture is not just happening within the U.S., but in other major countries. We still believe the upside for the U.S. 10-year is limited.

Jun 07 2013

Timing The “Taper”

  • Jun 7, 2013

The new debate over the QE “taper” erupted at the same time that a long-reliable Fed-tracking tool is telling us it’s time to ease.

May 04 2011

The Bond Bubble Is Beginning To Deflate… Is This Cheap Money Era Ending?

  • May 4, 2011

An orderly decline of the dollar is not necessarily a big concern. On the other hand, a sudden collapse of the dollar, in conjunction with spiking U.S. interest rates, would be a terrible thing. So far this has not been the case.


Dec 05 2007

How Low Will The Fed Go? Bond Market May Be Offering Some Clues

  • Dec 5, 2007

In trying to assess how far the Fed may ultimately be forced to cut rates, the price action in short term Treasuries and historical yield relationships may offer some clues.

Jul 04 2003

View From The North Country

  • Jul 4, 2003

Stocks can go up, when interest rates go up. Rates are expected to rise over the second half of 2003, but stocks have proven they can go up in environment of rising rates.

Jun 04 2003

Bond Market Summary

  • Jun 4, 2003

Is the Fed ready to buy Ten Year Treasuries to stimulate the economy? This could certainly lead to another housing/refi boom. But are lower rates really necessary to boost business spending?

Dec 04 2002

Eight Weeks Up....Now What?

  • Dec 4, 2002

Assessing Market Risk. We see minor or minimal risk from the economy, inflation, and earnings. But, terrorist attacks and valuations could be more significant risk. Iraq is a moderate short term risk.

Jun 05 2002

View From The North Country

  • Jun 5, 2002

In today’s environment, portfolio managers are forced to sell best stocks, as style police enforce tighter restrictions. Also, why a Fed Funds rate below 3% is bad for the economy.

Apr 03 2002

Rising Interest Rates Don't Always Mean A Falling Stock Market

  • Apr 3, 2002

A look at market performance over five different rising interest rate periods. Results are somewhat surprising.

Jan 04 2001

2001: A Wild Beginning

  • Jan 4, 2001

Two trading days into 2001, and the first day delivered the second-worst-ever, first day trading loss in the S&P 500 (the worst-ever being the first day of 1932!). Day Two: A surprise, 50 basis point Fed rate cut, brought an upside explosion.

May 04 2000

Reprint Of Early April Conference Call

  • May 4, 2000

Special reprint of Steve Leuthold, Byron Wien and Charley Maxwell conference call from early April.

Mar 05 2000

Inflation & Interest Rates

  • Mar 5, 2000

Favorite stock groups now “inflation and interest rate proof”?

Jul 05 1999

View From The North Country

  • Jul 5, 1999

Despite proclamation of a “neutral” bias toward future interest rate shifts, expect the Fed to raise short rates at least 25 basis points more.

Jul 05 1999

Bond Market Summary

  • Jul 5, 1999

Recent 25 basis point bump-up by Fed will not be the last. More tightening seems likely but T-bonds now look to be in the high end of a buying zone.

Jun 02 1999

Bond Market Summary

  • Jun 2, 1999

Strong likelihood the Fed will tighten in next few months, but today’s market rates may already factor in future 25-50 basis point Fed bump up in short rates.

Sep 05 1992

Bond Market Summary

  • Sep 5, 1992

My current view towards long bonds from an institutional investor's point of view is to sell some now and sell some more when longer term momentum slows.

Jul 05 1992

Bond Market Summary

  • Jul 5, 1992

June was a rather steady dull month in the bond market but there was a pre-4th of July explosion on the upside as bond market grave dancers cheered the stunning jump in unemployment.