Growth is determined by a perpetual tug-of-war between entrepreneurship and government redistribution. When President Obama was in office, we believed incredible technological innovation would allow for economic growth in spite of Obamacare, greater redistribution, higher taxes and increased regulatory burdens. We thought it would be a Plow Horse Economy, and that things would get better [...]
Forgive us our incredulity. The bond vigilantes were certain that as the Federal Reserve hiked short-term rates, long-term interest rates would barely budge, the yield curve would invert, and the economy would fall into recession. That theory has been blown to smithereens, so now we hear that it's rising long-term rates that will cause a [...]
On March 9, 2018, the bull market in U.S. stocks will celebrate its ninth anniversary. And, what we find most amazing is how few people truly understand it. To this day, in spite of massive increases in corporate earnings, many still think the market is one big "sugar high" – a bubble built on a [...]
Posted Under: Bullish • Government • Markets • Research Reports • Fed Reserve • Interest Rates • Spending • Taxes • Stocks Last year US stock markets experienced the least volatile year on record, hitting new highs seemingly every day. Then came the tax reform bill to end 2017, and a huge January with the S&P 500 rising 5.6%. Investors, especially individuals who finally became convinced that the rally would [...]
Back in the 1970s, supporters of the status quo said there was nothing to be done about stagflation (high inflation and slow growth). It was a "fact of life" that Americans had to accept after experiencing faster growth and lower inflation during the decades immediately following World War II. Then, along came the supply-side and [...]
You know the old saying about every cloud having a silver lining? Well, if you listen to some of the financial press, you'd think their motto was that clear skies are just clouds in disguise. Friday's GDP report showed the economy grew 2.5% in 2017, an acceleration from the average rate of 2.2% from the [...]
We've called the slow, plodding economic recovery from mid-2009 through early 2017 a Plow Horse. It wasn't a thoroughbred, but it wasn't going to keel over and die either. Growth trudged along at a sluggish – but steady - 2.1% average annual rate. Thanks to improved policy out of Washington, the Plow Horse has picked [...]
The stock market is on a tear. The S&P 500 rose 19.4% in 2017 excluding dividends, and is already up over 4% in 2018. It's not a bubble or a sugar high. Our capitalized profits model, says the broad U.S. stock market, is, and was, undervalued. We never believed the "sugar high" theory that QE [...]
Bonds have been in a "bull market" for the past thirty-seven years. Not every quarter, or every month, but bond yields have fallen consistently since Paul Volcker ended the inflation of the 1970s. And just like any long-term bull market or bubble justifications proliferate. The current 10-year Treasury yield is 2.46%, which equates to a [...]