The Market is Almost Wrong about What the Fed Will Do Actually, the Fed decides when to raise rates. But the market decides when to cut rates: “Markets have accurately priced in cuts before easing cycles begin.” Keep in mind that rate cut expectations are highly predictive six months in advance. You may also like “Fed Policy…
Short-term Pessimism Almost as Extreme as December The trade war and tariffs scared the stock market. Short-term pessimism is generally a good contrarian indicator, especially at a time when the media seem to be worried about the market. Image: Ned Davis Research
ISM Manufacturing vs. 10-Year Treasury Yields This chart shows a nice correlation between ISM manufacturing index and 10-year Treasury yields since 2010. This chart can explain why 10-year Treasury yields have fallen. PMI index above 50 percent indicates that the manufacturing economy is expanding, and a PMI index below 50 percent indicates that the manufacturing…
Billionaire Ken Fisher Doesn’t Think the Fed Matters Here’s Why Another great interview with Ken Fisher: “It is a bull market, but people are too focus on the negative.” Keep in mind that knowledge is the key to understanding markets.
Global Real M1 Growth Leads Global Manufacturing PMI by around 6 Months When global real M1 money supply growth is very low, it does not bode well for global economic activity. Image: The Wall Street Journal
U.S. 10-Year Treasury Note Produces Extremely High Sharpe Ratio During Shifts to Easing This chart shows the high sharpe ratio of U.S. 10-Year Treasury Note during easing policy shifts. Image: Arbor Research & Trading LLC
Market Reaction to Fed Insurance Cuts vs. Fed Recession Cuts This chart shows the S&P 500 and 10-year Treasury Note response to Fed insurance cuts vs. Fed recession cuts. There is a big difference for equities, but not too much for bonds. Image: Pictet Wealth Management
Fed Monetary Policy Rate Change over 6 Months Prices in (Futures) vs. Actual Actually, the Fed decides when to raise rates, but the market decides when to cut rates. This chart shows that rate expectations are highly predictive six months in advance. You may also like “Markets Have Accurately Priced in Cuts before Easing Cycles…
$11 Trillion Bonds Globally Trade At Negative Interest Rates The total amount of negative interest rates climbed to USD 11 trillion. Investors are paying governments for the privilege of holding their bonds and are losing so much money in real terms. Image: Deutsche Bank Global Research
S&P 500 Performance Around Previous Fed Cuts This spreadsheet shows that the S&P 500 has performed well on average, around first Fed rate cut. Image: Barclays Research
Cyclical Stocks Responding to Steepening Long-term Yield Curve Keep in mind that the Fed has little influence on the long end of the yield curve. And currently, the 30-year Treasury rate minus 10-year Treasury rate spread has a normal upward slope, like in the mid-1990s when the economy was growing. The chart below shows that the…