US Economy

  • 29 Jun
    BREXIT Aftermath: Where to Look for Returns & What to Avoid Now

    BREXIT Aftermath: Where to Look for Returns & What to Avoid Now

    • U.S. and Europe are overvalued, especially seeing the current political situation and economic fragility.
    • What’s about to hit Europe and the U.S. already hit emerging markets in 2015. There are opportunities in emerging markets now, but where?
    • Bonds seem the riskiest asset of all with no yield and huge potential downside.

    Introduction

    After last week’s BREXIT vote the markets have been in a free fall with a slight recovery yesterday. But savvy investors have been expecting this and it has been a recurring theme at Investiv Daily that stocks are overvalued. In such an overvalued environment it is normal that inflated asset prices take a beating at any sign of future uncertainty. More →

  • 24 Jun
    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    • The risks of a slowdown are higher than the upside.
    • Fundamental trends are negative in advanced economies while emerging markets show higher growth rates and are cheaper.
    • It is important to create a diversified portfolio with uncorrelated assets.

    Introduction

    In an environment where it seems maximum potential for the U.S. economy has been reached, the St. Louis FED chief, James Bullard, has said in his most recent report that he favors only one interest rate increase through 2018, which would at best keep things stable. His view is further supported by the fact that the unemployment rate is sitting at below 5%, and the Personal Consumption Expenditures PCE inflation—measured by the Dallas FED—is at 1.84%, both of which signal that the economy has reached its maximum potential. More →

  • 23 Jun
    Will There Be A Long Term Impact To The Fed’s Shift In Rhetoric?

    Will There Be A Long Term Impact To The Fed’s Shift In Rhetoric?

    • A positive outlook seems more political than realistic as the FED is out of maneuvering power.
    • Keeping interest rates unchanged is the best and the only thing the FED can currently do.
    • Low interest rates will weaken the dollar, boost exports and increase corporate earnings in the upcoming earnings season.

    Introduction

    In FED’s Chairwoman Yellen semiannual policy report, the rhetoric has significantly changed since the last report in February. In short, the full employment target is almost reached but the inflation rate is still below the targeted 2% and the expectations for the reaching of that target have been changed from short term to medium term. Further, the latest job reports show a slowdown in jobs increases which creates a bit of a scare. The FED estimates the slowdown to be transitory. More →

  • 13 Jun
    Do You Feel 50% Richer than 7 Years Ago?

    Do You Feel 50% Richer than 7 Years Ago?

    • US net worth has been increasing due to asset price inflation.
    • Asset price inflation has been influenced more by cheap money and less by GDP that has been growing on debt based consumer spending.
    • As the FED is out of firepower to protect the markets and the economy from any shocks they have no downside cushion.

    Introduction

    On June 9 the FED released its quarterly Financial Accounts of the United States. The report shows the total of accounts for various things, from net household worth, debt per segment, consumer spending to the general flow of funds. Unlike the usual newspaper that focuses on easy to reproduce single pieces of information, this 196-page report gives a clear picture of what is going on in the US economy, the developing trends and therefore has to be well understood by anyone who has an interest in the US economy. More →

    By Sven Carlin FED Investiv Daily US Economy
  • 09 Jun
    Forget About The November Elections – This Will Impact Your Investments Even More

    Forget About The November Elections – This Will Impact Your Investments Even More

    • Slower global growth will have a much stronger impact on corporate earnings than interest rate increases.
    • US productivity is declining and GDP growth is based on increased consumption amidst cheap financing.
    • Corporate earnings are the source of your investment returns, and the picture is not one of growth.

    Introduction

    Amid all the fuss around interest rates, Yellen, jobs, Clinton and Trump there is one piece of information that is very significant for investors but is often disregarded. More →

  • 06 Jun
    Headline Rollercoaster: The Economic Limbo Continues

    Headline Rollercoaster: The Economic Limbo Continues

    • Europe and Japan continue with their easing policies as not much changes.
    • Chinese Purchasing Managers’ Index is positive but not far from stagnation.
    • US data flirts between a dead cat bounce and a stronger economic recovery.
    • Finding specific good investments should be the best answer to uncertain economic times ahead.

    Introduction

    Last week was an interesting one as it was filled with various economic news. It is important to summarize that news to see if it will move the needle as the market has moved only sideways since December 2014. More →

  • 20 May
    An Analysis of and the Implication of the FOMC Minutes

    An Analysis of and the Implication of the FOMC Minutes

    • An interest rate increase is hanging in the air but no one seems to find enough reasons to pull the trigger.
    • The FOMC expects inflation to be at 2% and interest rates at 2.6% by 2018.
    • Holders of long-term bonds might rethink their positions as interest rate increases could have severe negative repercussions on bond prices.

    Introduction 

    On May 18 the FED released the minutes of the Federal Open Market Committee (FOMC) meeting held in April. The FOMC decided not to increase interest rates in April which gave a short relief to the markets, but an analysis of the FOMC meeting minutes reveals interesting things because it gives indications on the way of thinking FOMC participants have and hints on potential future interest rate increases. While the goal of the FED is to maintain financial stability and increase the resilience of the financial system to shocks, for an investor it is important to look at the economic trends related to the FOMC’s decisions in order to better assess the risks of their portfolio. More →

  • 13 May
    The Odds for a US Recession

    The Odds for a US Recession

    • The current is the fourth-longest US economic expansion period with 84 months of growth.
    • Investment spending has been declining for the last 4 quarters.
    • Recession forecasts indicate increased chances in the medium term.

    Introduction 

    The scariest word for any investor is the word recession. A recession arises when there is negative economic growth for two consecutive quarters. No economic growth makes it difficult for businesses to grow as people tend to spend less and save until better times come around. This creates a spiral as less spending forces companies to lay off employees and further cuts investments. If prolonged economic hardships persist, governments intervene with quantitative easing or with other projects to get the economy going again. A recession has an immediate negative impact on financial markets as investors become more risk averse and seek security above all. More →

    By Sven Carlin Investiv Daily US Economy
  • 09 May
    How the Jobs Report Affects Stocks

    How the Jobs Report Affects Stocks

    • The April jobs report shows two sides: slower hiring and increased working times and wages.
    • The long term outlook is pessimistic due to the constant decline in the labor participation rate.

    Introduction

    On May 6, the Bureau of Labor and Statistics (BLS) released its monthly employment situation summary.

    The report is released on the first Friday of the month for the previous month. It consists of two parts: one presents non-farm payrolls, hours worked and hourly earnings, and the other is created by surveying more than 60,000 households in order to extract the unemployment rate. More →

  • 25 Apr
    A Broader Perspective on the Global Economy

    A Broader Perspective on the Global Economy

    • Easing monetary policies go on globally but do not seem to fuel sustainable growth.
    • China is slowing, Japan is looking toward another recession, and the global outlook is adjusted downwards.
    • Bad news might be around the corner, but good news is as well.

    Introduction

    News is usually focused on the latest happenings. The fact that the human brain is set up in a way that it always tries to focus and eliminate marginal information brings to the consequence that most people do not objectively analyze the world around them. An example: How many blue cars have you seen today? Probably none because you were not looking for them, but as soon as you focus on them you will be surprised by how many you will see. The same applies to finance. More →

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