Oil prices (West Texas Intermediate or WTI) have increased 40% from the low in early December 2021 to the highest level since 2014.  Source: Koyfin. This may lead to an increase in the monthly growth rate of inflation measures like the consumer price index (CPI) and the producer price index (PPI).  At the same time,...Read More

During the most recent Federal Open Market Committee (FOMC) meeting and press conference, chairman Powell reiterated that the committee intends to begin raising interest rates in 2022.  The bond market already reflects some of these changes and looks similar to the last time the FOMC was increasing rates in 2018 but with some important differences....Read More

Market signals across asset classes are suggesting that investors are likely pricing in an expectation of a deceleration in the rate of change for economic growth, inflation, and corporate fundamentals.  In the fixed income markets, longer-term interest rates declined into the end of last week and the thirty-year U.S. Treasury yield did not get back...Read More

Market signal strength trends tend to move away from cyclical/speculative factors and towards higher quality/defensive factors as the economic cycle slows.  Our view continues to be that the rate of change for economic growth and inflation will likely slow in 2022, leading to a continued strengthening in market signals for defensive areas.  Some of the...Read More

In our post from last week, we noted that the rate of change for economic growth and inflation will likely slow in 2022.  This tends to lead to lower interest rates and flatter curves, which in turn causes rate sensitive and higher-quality factors to outperform commodity and low-quality factors.  A similar dynamic occurred in the...Read More

We believe the rate of change for inflation will likely slow in 2022 compared to 2021.  Some of this impact will be driven by difficult comparisons due to the large increases experienced in 2021.  Source: FRED. Some of the larger components of the consumer inflation basket also have difficult comparisons in 2021.  Home prices increased...Read More

The Federal Reserve held a meeting last week to discuss the state of the economy and update their policy stance.  At the conclusion of the meeting, they determined that inflation rates could remain above their target level, and they will start to become less accommodative in the coming months.  Part of this change in policy...Read More

The direction of inflation has been a topic of debate for several months and something we have written about for over a year.  Until recently, the market and economic data had suggested that the rate of change for inflation would be positive.  The November Consumer Price Index (CPI) made a new multi-decade high of 6.8%...Read More

This was another volatile week but provided some more signals regarding how investors are viewing growth and inflation trends in the U.S. and global markets, the impact of the new variant, and the diverging trends across different asset classes and geographies. In the commodity space, energy-oriented areas like oil and natural gas declined again and...Read More

The announcement of a new variant of COVID-19 contributed to a sizeable move across multiple asset classes last week.  It is too early to tell what the impact will be on the economy going forward, so we will have to watch the market signals for guidance on what impact investors expect the variant to have...Read More