Let us not sugarcoat it.

The spread between 10-year and three-month bonds is in negative territory, implying financial institutions have less incentive to extend loans to borrowers. The latest data from the conference board suggests the leading economic indicators are dropping. We hear the big “R” word (recession) often by the corporate leaders in the quarterly meetings. Global firms are …

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Investor Sentiment as a Contrarian Indicator.

AAII sentiment indicator shows pessimism at 60%. Sentiment describes a group of people’s opinions, emotions, or views. In investing, sentiment can be a powerful determinant of security prices, especially in the short run. Emotions—whether rational or irrational—can drive market prices. The price at which an individual security trades is the total sentiment of all market …

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Global Central Banks Following the Fed’s Path.

With inflation at multi-decade highs in many countries and pressures broadening beyond food and energy prices, policymakers have pivoted toward tighter policy. The monetary policy cycle is now increasingly synchronized around the world. Notably, the pace of tightening is accelerating in several countries, particularly in advanced economies, in terms of both frequency and magnitude of …

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Fed Raises Interest Rates by 0.75 Percentage Point.

Officials project short-term rates will rise above 4.25% by year’s end, signaling further large increases at future meetings. The Federal Reserve approved its third consecutive interest-rate rise of 0.75 percentage points. It signaled significant additional increases were likely at future meetings as it combats inflation that remains near a 40-year high. The decision Wednesday, unanimously supported by the Fed’s 12-member …

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Highest number of S&P 500 companies citing “Recession” on Q2 earnings calls in over 10 years.

Given the decline in GDP for the second quarter, more S&P 500 companies than typically discussed the term “recession” during their earnings conference call for the second quarter.   240 companies cited the term “recession,” and 412 companies cited “inflation” during their earnings calls for the second quarter From June 15 through September 8, which …

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Untamed Inflation warrants rate hikes.

The Consumer Price Index for All Urban Consumers rose 0.1 percent in August on a seasonally adjusted basis. Over the last 12 months, the all-items index increased 8.3 percent before seasonal adjustment. On a year-over-year basis, food prices went up 11.4%, energy prices by 23.8%, new vehicles by 10.1%, and transportation costs by 11.3%. On …

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Fools Rush In

If history is the guide, in March 1980, inflation peaked at 14.6%, and Fed raised rates to 19.1% to bring back inflation to the neutral rate in June 1981. And, if the Core inflation is at 9%, is a 2.5% Fed rate enough to tame the beast? In our opinion, Markets misread the Fed statement …

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Unaffordable Housing Market

As the fed raises interest rates in 2022 and possibly in 2023, short-term rates will go higher and nudge the ten-year rates higher than the current rates despite the inverted curve. Most probably, mortgage rates may go even higher than current rates. However, mortgage rates are still historically lower than those a couple of decades …

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