Personal interest income will rise as the Federal Reserve raises interest rates. Banks will be slow to raise rates on deposits and on CDs. Nevertheless, as the Fed raises rates, this is a problem.
James Montier reveals data showing everyone knows stocks are overvalued. But they act as if they believe they can get out before the bottom falls out. This will end badly when the market stalls out.
Volatility is still elevated in US equity markets. Rising real yields are the big factor there. All signs are that real yields can continue to rise. But going forward, globally, some other issues to consider are household debt and the ECB’s likely regime shift.
Rotating into emerging market equities as the US market soars is Jeremy Grantham’s recommendation. That’s a daunting prospect for most US retail investors. Here’s why.
Albert Edwards says the Fed will tighten more aggressively. The increase in interest rates will be a stimulant at first. But eventually, the higher rates will catch up with debtors.
Rising inflation expectations are pushing interest rates higher. But Fed moves matter more. If the data continue to show growth in the economy, markets will move toward the Fed and interest rates will rise.
While the consensus narrative fears of rising inflation triggered equity sales has much to recommend itself, there is a major discrepancy.
This month, we have seen an unprecedented increase in volatility. When the fundamentals take a knock, that’s when we should worry though. Let’s wait for the CPI next week and revisit this conversation.
The short vol trade may now be over. Bond yields will again reach levels that causes angst for equity markets. And equities will tumble. Rinse and repeat.
Yesterday’s market meltdown – and today’s reaction – reduces the risk that the Fed will over-tighten, taking froth out of an over-extended market.
Everyone is bond bearish these days. Alan Greenspan is because he expects inflation. But this will mean tightening that risks derailing the US economy in 2019 and beyond.
Jeremy Grantham discussed his recent US market commentary with Consuelo Mack. The essence of Grantham’s comments were bearish for the US, suggesting investors could expect only a couple of percent real return over the next couple of decades in US equities. He suggests rotating into Emerging Markets.