Today Fed Chair Jay Powell offered his latest sentiment on the economy and monetary policy from the Jackson Hole Summit. Whilst he leant hawkish (my expectation) – he also admitted he doesn’t know what’s ahead. Nothing wrong with that… better decision making starts by first recognizing what we don’t (or can’t) know. Powell stated “… as is often the case, we are navigating by the stars under cloudy skies”. Question is – what does that mean for markets and rates ahead?
"Inflation"
Why Core Inflation Will Remain Sticky
Markets got excited on news of the softer-than-expected CPI headline print today. Headline inflation came in at 3.2% YoY vs expectations of 3.3%. However, what deserves closer scrutiny is not the headline number – it’s Core CPI at 4.7% YoY and shelter costs. For e.g., two-thirds of the monthly inflation increase came from shelter – where rents rose 0.4% MoM. This is now the 18th straight month the price of shelter has risen at least 0.4% MoM. But here’s the thing – there isn’t. much the Fed can do with monetary policy to change this.
Buffett is Buying Bonds
Warren Buffett is pouring tens of billions of Berkshire money into short and longer-term bonds. And I’m not surprised… For e.g., Jul 9th I offered this post “Think About Adding Bonds”. Shorter-term bills were offering investors ~5.50% and the longer-date 10-year bond above 4.0%. That’s attractive for a number of reasons… this post explains why.
Half Way Through Earnings: 81% Beat on EPS
This week was the busiest week of earnings on the calendar. Half of all S&P 500 companies have now reported for Q2. So far so good! 81% of companies have beaten earnings per share (EPS) expectations – by an average of about 6.4%. By way of comparison – prior to COVID – the average EPS beat was in the realm of ~3%. What’s more, about 64% of all companies have also beaten top line expectations. The question is will this continue in the second half?
For a full list of posts from 2017…