Research & News
Asset Allocation Weekly (June 21, 2019)
by Asset Allocation Committee In 2017, we introduced an indicator of the basic health of the economy and added it to the many charts we monitor to gauge market conditions. The indicator is constructed using commodity prices, initial claims and consumer confidence. The thesis behind this indicator is that these three components should offer a simple… Read More »
Weekly Geopolitical Report – War with Iran? (June 17, 2019)
by Bill O’Grady Over the past year, U.S. relations with Iran have deteriorated. In May 2018, President Trump announced he would withdraw from the Joint Comprehensive Plan of Action (JCPOA), a multinational treaty that was designed to slow, but not eliminate, Iran’s nuclear development. As part of exiting the JCPOA, the U.S. reapplied sanctions that have… Read More »
Asset Allocation Weekly (June 14, 2019)
by Asset Allocation Committee Establishing when “the” yield curve inverts is a bit of guesswork as there are a plethora of permutations one can use to calculate the spread. One yield curve we like is the same one the Conference Board uses in its index of Leading Economic Indicators, namely, the 10-year T-note less fed funds… Read More »
Weekly Geopolitical Report – Reflections on Tiananmen (June 10, 2019)
by Bill O’Grady Thirty years ago, on June 4, troops from the People’s Liberation Army (PLA) descended upon Tiananmen Square to forcibly remove protestors who had been using the space for about two months. The protestors were agitating for democracy, an end to corruption and a more inclusive political system. Details of the incident remain unsettled. … Read More »
Asset Allocation Weekly (June 7, 2019)
by Asset Allocation Committee Monetary policymakers are facing divergent trends that complicate future policy actions. Financial markets are signaling that the policy rate needs to be cut immediately. The chart on the left shows the implied three-month LIBOR rate, two-years deferred, from the Eurodollar futures market. Last October, the implied rate was around 3.30%; it has… Read More »
Weekly Geopolitical Report – Rare Earths (June 3, 2019)
by Bill O’Grady (NB: To improve readability, we are now linking references to media reports and articles directly in the text via hyperlinks. Footnoting will be reserved for documents to which we can’t link or to provide additional clarity on a topic.) Since early May, the trade tensions with China have morphed into a broader conflict. … Read More »
Asset Allocation Weekly (May 31, 2019)
by Asset Allocation Committee There are three factors that tend to cause recessions—inventory misadjustments, policy errors and geopolitical events. The first in the series has become less of a factor over time. Inventory management has improved dramatically since the end of WWII, and excess inventory leading to falling output has become less of an issue. Therefore,… Read More »
Asset Allocation Weekly (May 24, 2019)
by Asset Allocation Committee How important have mergers, buybacks, etc. been to equity market performance? Several analysts have attempted to answer this question by focusing on buybacks alone. However, there is a more straightforward method of looking at this question and including all the factors that affect the number of shares available—the index divisor. This chart… Read More »
Weekly Geopolitical Report – Venezuela: An Update, Part II (May 20, 2019)
by Bill O’Grady (N.B. Due to the Memorial Day holiday, the next issue will be published June 3.) In Part I of this report, we provided readers with a short history of Venezuela to bring some context to the current situation. This week, Part II, will examine the attempts by the opposition to oust Maduro, the… Read More »