Research & News
Asset Allocation Weekly (April 6, 2018)
by Asset Allocation Committee Recently, the three-month T-bill/Eurodollar spread (TED spread) has widened, raising concerns about financial stability. In this report, we will offer a primer on the spread and discuss its recent rise. The TED spread has two components; it’s a direction-of-rate spread and a flight-to-quality spread. Eurodollars (also known as LIBOR) represent dollar borrowing… Read More »
Asset Allocation Weekly (March 29, 2018)
by Asset Allocation Committee After peaking at 2872.87 on January 26, the S&P 500 has been in a corrective phase. The index fell just over 10% and has been range bound ever since, well below the aforementioned high. Here are the primary reasons equities have struggled: Valuations became a bit stretched: The P/E, as we calculate… Read More »
Weekly Geopolitical Report – The North Korean Summit: Part II (March 26, 2018)
by Bill O’Grady (Due to the Easter holiday, the next report will be published on April 9.) Last week,[1] we discussed the six major nations involved in the North Korean issue and each country’s geopolitical goals, constraints and meeting positions for the recently proposed summit between the U.S. and North Korea. This week, we will examine… Read More »
Asset Allocation Weekly (March 23, 2018)
by Asset Allocation Committee Last week, the Federal Reserve published its Financial Accounts of the United States report, formerly known as the Flow of Funds report. The report is a storehouse of important financial information. In this most recent report, a few things emerged that raised concerns. The first issue is net saving. Net saving is… Read More »
Weekly Geopolitical Report – The North Korean Summit: Part I (March 19, 2018)
by Bill O’Grady On March 8, officials from South Korea, including Chung Eui-yong, the director of South Korea’s National Security Office, came to Washington to brief U.S. officials on a recent dinner with Kim Jong-un, the leader of North Korea. The dinner was held in Pyongyang at North Korea’s Workers’ Party Headquarters, Kim’s workplace, where Mr.… Read More »
Asset Allocation Weekly (March 16, 2018)
by Asset Allocation Committee Last week, we discussed the fact that the generally strong economy should be supportive for equity markets as economic growth will tend to support earnings. However, the other important element of equity valuation is what multiple investors put on those earnings. The most common valuation metric is the price/earnings ratio (P/E). Our… Read More »
Quarterly Energy Comment (March 13, 2018)
by Bill O’Grady The Market Over the past quarter, oil prices have ranged from a low of around $56 to a high of $66 per barrel. Prices remain elevated, supported by OPEC production discipline and solid global oil demand. Prices and Inventories Inventory levels remain elevated but have clearly declined from last year’s peak. View… Read More »
Weekly Geopolitical Report – Emperor Xi: Part II (March 12, 2018)
by Bill O’Grady Last week, we discussed China’s power structure and how the suspension of term limits changes recent precedents. We examined President Xi’s actions in his first term to consolidate power and prepare for the next phase in China’s adjustment. We concluded with the reasons for moving now and what it potentially signals about Xi’s… Read More »
Asset Allocation Weekly (March 9, 2018)
by Asset Allocation Committee Last year, we introduced an indicator of the basic health of the economy and added it to the many charts we monitor in gauging market conditions. The indicator is constructed with 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 – Emperor Xi: Part I (March 5, 2018)
by Bill O’Grady On February 25th, the Central Committee of the Chinese Communist Party (CPC) announced that it would recommend an end to term limits on the offices of president and vice president. Previously, an officeholder was limited to two five-year terms. We fully expect the recommendation to be approved (recommendations from the Central Committee are… Read More »