Tag: U.S. Economy

Don't Let The Headlines Fool You

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Back in 1925 President Calvin Coolidge famously said, “The business of America is business.” Apparently, this is still true even if the current administration more closely resembles the Five Families rather than the worthy successors to Silent Cal.

Even as President Trump’s new communications director is “front-stabbing” his White House colleagues and Republicans in Congress can’t get anything done about health insurance reform except make themselves look foolish – and without any help from the Democrats – the economy seems to roll on regardless. Last week the Commerce Department reported that the American economy grew at an annual rate of 2.6% in the second quarter, the first full quarter of Donald Trump’s presidency. That was up sharply from the first quarter’s downwardly revised 1.2% rate and the second strongest rate in the past eight quarters.

That managed to happen thanks to some extent from the hope and anticipation of major health insurance and tax reform, not their actual enactment. Imagine what might happen if our lawmakers actually do what they’re supposed to be doing and those things become reality?

A more pertinent question for this column is: Is that growth rate strong enough to get the Federal Reserve back to raising interest rates again and start its “balance sheet normalization program,” i.e., trimming its $4.5 trillion securities portfolio? Continue reading "Don't Let The Headlines Fool You" →

Time For The Fed To Take It Easy

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor


The Fed’s June rate decision is coming up this week and the consensus bets are overwhelmingly tilting towards a rate hike. According to the CBOE Fed Funds rate probability chart, the probability the Fed will raise rates at the next meeting is 91.3%. Thus, suggesting that market participants are almost certain a rate hike is coming. Furthermore, there is also growing consensus that the Fed will also start trimming its balance sheet as early September. However, a deep dive into the mechanics of the US economy suggests that the Fed should ignore the consensus, and even its own outlook, and take a step back from tightening. And it all starts with the puzzling discrepancy between inflation and housing prices.

Home Prices Heat as Inflation Cools

Upon the surface, the latest fall in the US Core inflation rate, from 2.3%, four months ago to 1.9%, and the latest surge in US housing prices (as reflected by the Case-Shiller Index) present a somewhat puzzling divergence between the US inflation outlook and housing prices. Nonetheless, those two contradicting developments are closely intertwined, both to each other and to the Fed’s monetary policy. And, to illustrate the link between the two, we must dive into the US Treasury market. Continue reading "Time For The Fed To Take It Easy" →

S&P 500: Prepare For Choppiness

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor


After the S&P 500’s rather flat performance over the first three weeks of January, the Index has finally broken higher, pierced through the 2,280 resistance, and seems well on its way to surge above 2,300. So, the question of potential profit taking for the Index at this time may raise some eyebrows. But if we are to take the signals coming from the Federal Reserve over the past few weeks, this is exactly when we should be worried about profit taking and a jump in volatility for the Index.

While the S&P 500 (CME:SP500) was muddling through over the past few weeks, some attributed it to the protectionist stance of the new US president, e.g. the looming threat of a trade war with China, the risk of import levies and, of course, the latest events of this week. President Trump, in a characteristically dramatic fashion, announced the revocation of the Trans-Pacific Partnership Agreement and proclaimed his intention to renegotiate NAFTA, the North American Free Trade Agreement. And how did investors respond? By pushing the S&P 500 up and out of its stagnation and into a new high. Because, while investors are concerned about the risk of a protectionist trade policy, their concerns are somewhat soothed by Trump’s plan to slash the US corporate tax to 15% and boost infrastructure spending.

But what about the S&P 500 are the bulls ignoring? Continue reading "S&P 500: Prepare For Choppiness" →

Fed Tightening Will Unleash U.S. Growth

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The Federal Reserve, the only central bank in the G7 economies and China to raise rates and the only central bank to lead a tightening cycle, is also the only central bank to get it right. As counter-intuitive as that may sound, higher rates in a world of negative rates and massive monetization is the only viable solution to stimulate growth. To understand the irony, we must delve into credit markets and assess what’s broken.

Cheap Credit Expensive Growth

One of the arguments espoused by critics of monetary stimulus, whether it’s negative interest rates or quantitative easing, is inflation. But in reality the real cost of a ultra-loose monetary policy is the exact opposite—deflation; prices in most of the world and, in fact, in most products are either falling or stagnating. The reason is that when the policy is ultra-loose inefficient sectors of the economy are kept artificially afloat. As long as interest rates are close to zero failing sectors can keep on piling debt and thus contribute less and less to growth while leaving less available capital to the more efficient sectors that really need to grow. Continue reading "Fed Tightening Will Unleash U.S. Growth" →

Semiconductor Sector, Updated

Posted on by The INO.com Team

By: Gary Tanashian of Biiwii.com

We have been using the Semis as a one of several economic signposts, and as an investment/trading destination since the Semi Equipment ‘bookings’ category in the Book-to-Bill ratio began to ramp up several months ago.  But those who say that Semiconductors are subject to pricing pressures are correct.  It is a segment in which people need to be discrete with their investments.  NFTRH 410 updated some details about this market leader.

sox vs. ndx

sox vs. spx

Semiconductor Sector

Semi has been a leader for our overall market and economic view, which has been bullish since noting that a trend of three straight months of increased bookings was established in April. The Book-to-Bill for July came in strong once again, with a new high in the key ‘bookings’ category. Continue reading "Semiconductor Sector, Updated" →