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Fed Policy — Dancing Between Raindrops — Fed Tightening and Fiscal Policy Drag Tests 2023 Economic Outlook — Wage Pressures a Secondary Inflation Impact Could Lengthen Higher Inflation — Accelerating World Food Inflation Could Affect Emerging Market Debt Obligations — Fixed Income View Change

Date Posted: April 27, 2022
Current High Levels of Inflation—effect Broadening According to the Cleveland Fed, the median Consumer Price Index (CPI)  provides a better sense of  underlying inflation then either headline CPI or CPI excluding food and energy. Median CPI, represented in Figure 1 by the orange line, shows half of CPI components experienced annual price gains …

“Putin Shock” — Financialization of Warfare Threatens “Risk-Free” Status of U.S. Govt. Debt — Can the Fed Thread the Needle Between Soft Landing and Disinflation? – Will Planned Rate Increases Achieve Sufficient Positive Real Rates to Lower Inflation? — Will Eroding Consumers’ Real Incomes Lead to Slower Economic Growth and Shift Away from National Brands? – Will Tight Labor Markets Lead to Higher Productivity? –Displacement and Replacement?

Date Posted: March 29, 2022
“Putin Shock” Underlines Eurasian Threat to Western World—U.S. Global Military Power and U.S. Dollar Reserve Status Go Hand-In-Glove We titled our last commentary The “Putin Shock” Could Create Shocking Changes –  unfortunately, that proved too true. The “Putin shock” plus the pandemic changed our world for the foreseeable future. “The world ha…

“Putin Shock” May Create Shocking Changes – Inflation Becomes Viral? — Quantitative Tightening (QT) Lower Multiples? –Wage Pressures and Tight Labor Markets Lead to Higher Productivity?

Date Posted: March 1, 2022
COVID Variants Lower Forecast Confidence — Greater Market Volatility Americans entered 2021 with the hope that the miracle of vaccines would lead to an “end” to COVID as a major concern. A year later, with Omicron spreading rapidly, albeit a milder variant, that hope remains unanswered (see Figure 1). With that, government leaders suggest Ameri…

Fed Rate Liftoff and Balance Sheet Runoff (QT) Difficult to Pull off in Parallel — Produces Heightened Policy Risks — QT Could Reduce Market Liquidity — Earnings Growth Then Key to Equity Performance Rather Than Multiples — Negative Real Rates Remain — Result Limited Economic Restraint — Consensus Expects Inflation to Moderate Around Mid-Year — Risk to That Consensus Potential Extended Wage Pressures

Date Posted: January 25, 2022
COVID Variants Lower Forecast Confidence — Greater Market Volatility Americans entered 2021 with the hope that the miracle of vaccines would lead to an “end” to COVID as a major concern. A year later, with Omicron spreading rapidly, albeit a milder variant, that hope remains unanswered (see Figure 1). With that, government leaders suggest Ame…

COVID Variants Lower Forecast Confidence — Greater Market Volatility

Date Posted: January 21, 2022
Fed Rate Liftoff and Balance Sheet Runoff (QT) Difficult to Pull off in Parallel — Produces Heightened Policy Risks — QT Could Reduce Market Liquidity — Earnings Growth Then Key to Equity Performance Rather Than Multiples — Negative Real Rates Remain — Result Limited Economic Restraint — Consensus Expects Inflation to Moderate Around Mid-Year — …

2022 – the Year Ahead Living With COVID Variants – More Mini-Cycles Transitory or Persistent – How Long Will Inflation Take to Return to Low 2%?

Date Posted: December 2, 2021
Living With COVID Variants — Both Long-Lasting and More Mini-Cycles The economic outlook for 2022 and its future path depends, in part, on the likelihood of unpredictable breakouts of new COVID strains such as Delta and Omicron. Such outbreaks will lead to more mini-cycles. At the same time, we continue to live with the impact of earlier COVID …

Inflationary Supply Shocks – Will the Fed’s “Largely Transitory Inflation” View Prove to Be Transitory as Well? COVID Health Risk Gap – White-Collar Health Risks Compared to Blue Collar Workers – Will It Lead to Structural Changes in Job Markets?

Date Posted: October 21, 2021
Worker and Product Shortages — the Outcomes Will Help Determine How Long “Largely Transitory Inflation” Will Last This year provided investors with extremes of euphoria and worry. With 2021 moving into its final weeks, the outlook for 2022 will play an increasing role in near-term financial market performance. The fallout from the pandemic, inc…

Fed Tapering — Monetary Policy Still Accommodative — Potential Changes in Fed Membership More Dovish Policies — Financial System Awash in Cash, Fed Drains Cash Using Repos – Delta Variant Likely Peaked, Mini Cyclical Fourth Quarter Rebound — Shipping Delays and Locked Down Asian Factories Negatively Affect Fourth Quarter Sales and Earnings — Pricing Power of Goods Suppliers Will Determine Their Ability to Protect Margins From the COVID Spillover — Shelter Cost Inflation Heavy Weighting in CPI and PCE — Lags Real World Change 6-12 Months – Rent Increases Sticky

Date Posted: September 28, 2021
Fed Tapering — Reducing Securities Purchases — Modest Impact in the Economy – Monetary Policy Remains Accommodative In its recent meeting, the Federal Open Market Committee (FOMC) stated it looks to moderate its pace of asset purchases “soon” — tapering — likely no later than year-end. Each month the Fed increases its holdings of Treasury and a…

Commentary: Monetary Policy Still Accomodative—Fed Board Changes More Dovish Policies–Covid Spillover On Supply Chains Impacts 4th Quarter Earnings–Higher Shelter Costs Lag Effect On Price Indices–Sticky–Delta Variant Faced Mini-Cyclical Rebound

Date Posted: September 28, 2021
NOT APPROVED BY FCAG COMPLIANCE Fed Tapering—Monetary Policy Still Accommodative—Potential Changes in Fed Membership More Dovish Policies—Financial System Awash in Cash, Fed Drains Cash Using REPOs—Delta Variant Likely Peaked, Mini Cyclical Fourth Quarter Rebound—Shipping Delays and Locked Down Asian Factories Negatively Affect Fourth Quarter…

History Shows Virus Impact Greater After the First Year — Global Variant Snarls Supply Chains — Slows Inventory Rebuild — Inflationary Impact — Consumer Caution Slows Service Industry Return — Impacts Employment Growth — Variant May Delay Fed Tapering or Slow Its Rollout

Date Posted: August 24, 2021
Delta Variant Increases Inflationary Pressures—Supply Chains Snarled Most recently, the growing spread of the COVID-19 Delta Variant forced China to curtail cargo operations at both air and container ports. According to ship operators, global supply chains could remain snarled and not clear up until the first of the year, with the obvious impac…