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☆ The Perils of the Fed’s Vast Bond Holdings
▼ + stars: | 2024-05-03 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +2 min

But even after two years of quantitative tightening, the amount of bonds and securities that the Fed still retains is stupendous. Quantitative tightening is a perilous operation. Earlier attempts — notably, in 2019 — disrupted financial markets. The slow pace of quantitative tightening is partly responsible for the Fed’s inability to contribute to the national budget. That’s because the Fed has also raised interest rates, which move in the opposite direction of bond prices.

Persons: — Organizations: Fed, Treasury, Silicon Valley Bank Locations: United States

☆ With Inflation This High, Nobody Knows What a Dollar Is Worth
▼ + stars: | 2024-04-26 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

But exactly how inflation is hurting, helping and confusing people is hard to understand. There’s a fancy name for the common human failure to see past the gaudy prices largely created by inflation. This widespread inability to recognize what money is really worth is known as money illusion. Irving Fisher, a Yale economist, wrote a book about it nearly a century ago. But their insights tend to be forgotten when prices are fairly stable, as they were in the United States until three years ago.

Persons: you’re, Irving Fisher, John Maynard Keynes Organizations: Yale Locations: British, United States

☆ Inflation, Interest Rates and Oil Prices Have Jolted the Markets
▼ + stars: | 2024-04-19 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

The dollar has strengthened and there are new reasons to worry about a steep increase in the price of oil. Behind many of these changes are two familiar culprits: inflation and interest rates. The possibility of a widening conflict in the Middle East — and of rising oil prices feeding into inflation in the United States — surfaced again on Friday when Israel struck Iran. But consider this: For the first three months of 2024, U.S. stocks rose relentlessly, while bonds posted modest gains, amid expectations of a series of cuts in the short-term interest rates controlled by the Federal Reserve. Now, successive months of high inflation readings have dashed those hopes — or, at the very least, deferred them.

Persons: Bonds, Israel Organizations: Federal Reserve Locations: United States, Iran

☆ Trump or Biden? The Stock Market Doesn’t Care.
▼ + stars: | 2024-04-12 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

The markets assume that former President Donald J. Trump has an even chance of winning the November election. After trailing for months, President Biden has moved slightly ahead of Mr. Trump in the betting on Predictit, the longest-running commercial prediction market in the United States. On Betfair, a robust British prediction market that is officially closed to U.S. residents, Mr. Biden has moved within one percentage point of Mr. Trump. Polymarket, an offshore market that accepts only cryptocurrency, shows Mr. Trump slightly ahead. “The prediction markets right now are telling us that the presidential election is basically a tossup,” said Eric Zitzewitz, a Dartmouth economist.

Persons: Donald J, Trump, Biden, ”, Eric Zitzewitz, “ Organizations: Dartmouth Locations: United States

☆ The Market May Have Finally Hit a Real Record, But It Could Be a Problem
▼ + stars: | 2024-04-05 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

It’s been a splendid run for the market — so emphatically great that in just the first three months of the year, the S&P 500 climbed to record highs on 22 separate days. But what most reports and commentary haven’t pointed out is that because inflation has also climbed sharply over the last few years, the value of stock prices has eroded, along with nearly everything else in the economy. When you factor in inflation, the stock market did not actually reach new heights. That’s finally changing, with the market’s gains outpacing the ravages of inflation sufficiently to push real stock valuations close to a new peak, according to calculations by Robert J. Shiller, the Yale professor and Nobel laureate in economics. In a phone conversation, he said, “On a monthly, inflation-adjusted basis, it does appear that the S&P 500 now is right around a record high.”

Persons: It’s, Robert J, Shiller, “, ” Organizations: Yale

☆ Those Billion-Dollar Lottery ‘Jackpots’ Aren’t Even Half That Big
▼ + stars: | 2024-03-29 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

The advertised jackpots aren’t nearly as big as they look. And Powerball says its current jackpot is $935 million. These lottery grand prizes are a fortune, no doubt about that. But truth be told, those mouthwatering advertised jackpot numbers aimed at tempting people to buy tickets are misleading. Thanks to the magic of rising interest rates, the advertised numbers have swelled, while the real value of the current lottery prizes isn’t even half that much.

Locations: United States, New Jersey

☆ If Nvidia Keeps Rising Like This, It Will Be Bigger Than the Global Economy
▼ + stars: | 2024-03-15 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

It’s not a household name quite yet, but anyone who follows the stock market knows at least a little about Nvidia. The company is the wonder of the year, a stock by which all others are measured. Nvidia designs the chips that make artificial intelligence work, and because A.I. is being hailed as the most important technological development since the internet, Nvidia shares have been rocketing since last year. will one day become, but I do pay close attention to the stock market, which values Nvidia at more than $2.2 trillion, making it the third-largest public company in the world behind Microsoft and Apple.

Persons: It’s, I’m Organizations: Nvidia, Microsoft, Apple, Meta, AMD, Taiwan Semiconductor, Intel

☆ What History and Economics Suggest About Biden-Trump, Round 2
▼ + stars: | 2024-03-08 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

Politics and economics have always been intertwined, often in ways that were mystifying in real time. The polls show that many Americans perceive this contest with the distress reserved for root canals or colonoscopies. Democrats tend to view Mr. Trump as a villain who has committed serial misdeeds that include plotting to overturn the results of the last presidential election. At the same time, many Trump supporters see Mr. Biden as a doddering tax-and-spend political hack. The prospect of this dreaded rematch sent me back to the history books, and to economic and markets data, looking for precedents and parallels.

Persons: Biden, Donald J, Trump, Mr, —

☆ The Core of the Tax Code Will Change, but We Don’t Know How
▼ + stars: | 2024-03-02 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

Navigating the byzantine U.S. tax rules and completing your return may be enough of a headache. But you can count on fresh tax stress coming from Washington not far down the road. On Dec. 31, 2025, critical parts of the 2017 federal tax law are scheduled to expire. As if that weren’t complicated enough, the tax code before the 2017 law included provisions for future inflation adjustments — and there has been a lot of inflation over the last few years. These adjustments need to be applied if the law sunsets, as scheduled, making the actual numbers for important things like federal tax brackets difficult to estimate.

Persons: Trump Locations: Washington

☆ January Was Awesome for Stock Pickers, but Can They Keep It Going?
▼ + stars: | 2024-02-16 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

Over the last 20 years, stock pickers have had a dismal record. In some periods, stock pickers rule, and the start of this year was one of those times. The S&P 500 and other stock indexes set records during the month. It was that active stock funds did even better, though not by much, beating various market indexes by less than a percentage point, on average. That happened to be the best calendar year for stock pickers in decades.

Organizations: Bank of America

☆ IBM Reopens Its Frozen Pension Plan, Saving the Company Millions
▼ + stars: | 2024-02-09 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

Traditional pension plans haven’t come back. Last month, IBM thawed out a defined benefit pension plan that it had froze more than 15 years ago. These moves are startling, because, on the surface, at least, IBM seems to be reversing a decades-long trend of corporations moving away from traditional pension plans. IBM’s new approach is significant because the company has been a leader in employee benefit policymaking. In fact, IBM’s new pension plan isn’t nearly as generous to long-tenured employees compared with its predecessor.

Persons: haven’t Organizations: IBM

☆ The Market Has Had a Fabulous Run, but This Peak Doesn’t Really Matter
▼ + stars: | 2024-01-20 | by ( Jeff Sommer | ) www.nytimes.com time to read: 1 min

If you’ve been in the stock market for a while, congratulations. Now that the market has reached a new peak, you’ve probably made some money. The S&P 500 on Friday surpassed the peak it reached on Jan. 3, 2022. After a miserable performance in 2022, the stock market had a fabulous run. If you are a long-term investor, this particular market peak isn’t likely to matter.

Persons: you’ve

☆ Crypto Funds Have Arrived. But Who Needs Them?
▼ + stars: | 2024-01-19 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

Exchange-traded funds come in many shapes and sizes. Some are plain vanilla, diversified index funds that let you invest in the entire stock and bond markets, and are excellent core holdings for the great majority of people. Then there are the quirky, narrowly focused E.T.F.s like the Inverse Cramer Tracker, which enables you to bet against the stock picks of the CNBC television host Jim Cramer. The fund is legal, approved by the Securities and Exchange Commission — and a money-loser since its inception last year. Betting against Jim Cramer just isn’t a great investing strategy.

Persons: Jim Cramer, Bitcoin, legitimizing Organizations: CNBC, Securities and Exchange Commission Locations: Bitcoin

☆ After a Rip-Roaring 2023, the Markets Are Taking a Breather
▼ + stars: | 2024-01-13 | by ( Jeff Sommer | ) www.nytimes.com time to read: +1 min

It was a great year for the stock market and for the vast majority of investors in workplace retirement accounts. Even after the 2023 gains, most stock investors are only barely above water since the start of 2022. Even so, the paltry stock market increases haven’t kept up with inflation. It was arguably even worse than 2008, when the stock market collapsed during the great financial crisis. In 2022, bonds declined sharply in value as interest rates rose, while during the financial crisis, investment-grade bonds rallied as interest rates declined.

Persons: let’s, haven’t Organizations: Federal Reserve Locations: U.S

☆ Don’t Put Your Eggs in One Basket. That Investing Principle Still Holds.
▼ + stars: | 2023-12-01 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

I’m talking about the 60/40 portfolio, which has sometimes been considered the living heart of investing. They are merely a convenient starting point for thinking about investing and not an exact, general-purpose prescription for everyone. While it’s more complicated, it comes down to this: Don’t keep your eggs in one basket. Diversification in investing is as important now as it ever was, even if it hasn’t paid off lately. If you held a broad portfolio of stocks and bonds in 2022 — whether your mix was 60/40 or some other variant — you probably lost money.

☆ Wall Street is again making predictions for next year, but don't pay too much attention
▼ + stars: | 2023-11-29 | by ( Bob Pisani | ) www.cnbc.com time to read: +6 min

Not surprisingly, Wall Street tends to be a bullish group. Wall Street has a terrible track record All of this gets investor juices flowing. Wall Street strategists collectively have a terrible track record. As a result, you might be tempted to think you should pay no attention to Wall Street, or anybody else. If nothing else, the predictions of Wall Street strategists are a good starting point for all of us to think about the near future.

Persons: Lori Calvasina, America's Savita Subramanian, Morgan Stanley's Michael Wilson, Goldman Sachs, Morgan Stanley, Jeff Sommer, Sommer, Morgan Housel, I'm Organizations: Deutsche Bank, BMO Capital Markets, RBC Capital Markets, Bank, America's, Wall Street, of America, Barclays, UBS, Wealth, Wells, Wells Fargo Securities, Street, New York Times, Yardeni Research, Federal Reserve, Wall Locations: Wells Fargo, Russia, Ukraine, Israel

☆ In the Stock Market, Don’t Buy and Sell. Just Hold.
▼ + stars: | 2023-11-24 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

Selling all of your stock just before the market falls, and buying shares just before the market rises, is a brilliant strategy. And if you could repeat the feat over and over again, you would be fabulously rich — a true stock market wizard. Without question, it’s so hard that the vast majority of professional traders can’t do it, as countless studies have shown. Most of us are better off living with the reality that the stock market moves down as well as up, and that we can’t beat it. And the study implies that a simple, unspectacular strategy — buying and holding the entire market through low-cost index funds — is probably the best bet for most people.

☆ The Fed’s Decisions Now Could Alter the 2024 Elections
▼ + stars: | 2023-11-17 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

What’s happening in the economy now will have a big effect — perhaps, a decisive one — on the presidential election and control of Congress in 2024. Right now, that model, created and run by Ray Fair, a Yale economist, shows that the 2024 national elections are very much up for grabs. The economy is strong enough for the incumbent Democrats to win the popular vote for the presidency and Congress next year, Professor Fair’s projections find. Persistent — though declining — inflation also gives the Republicans a reasonable chance of victory, the model shows. Both outcomes are within the model’s margin for error.

Persons: Ray Fair, it’s Organizations: Yale

☆ The Betting on the Presidential Election Has Begun
▼ + stars: | 2023-11-10 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

Financial journalists love Wall Street aphorisms. “The stock market climbs a wall of worry” is useful whenever investors are fretting. That hallowed saying could be repurposed today, except for a formidable problem. It refers to the betting on elections that took place on Wall Street, which was commonplace back then — and covered extensively in The Times and other major newspapers, as an important source of information about national, state and local political contests. Today, except for indirect and elaborate financial hedges on the policy implications of election outcomes, outright betting on elections is no longer a core part of American finance.

Persons: “ Don’t Organizations: Wall, The New York Times, The Locations: The Times

☆ In a Warming World, Clean Energy Stocks Fall While Oil Prospers
▼ + stars: | 2023-11-03 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

But the stock market doesn’t seem to have gotten the memo. Instead, the shares of a broad range of clean energy companies have been crushed lately, in a rout that encompasses just about every alternative energy sector, including solar, wind and geothermal power. At the same time, rather than weaning themselves off oil, Exxon Mobil and Chevron, the two biggest U.S. oil companies, are doubling down. The evidence that carbon emissions are warming the planet is persuasive. Yet the stock market, which is supposed to be forward-looking, is treating alternative energy companies with disdain and big oil companies with respect.

Persons: Hess Organizations: Exxon Mobil, Chevron, Exxon, Natural Resources

☆ The Bond Market, a Sleeping Giant, Awakes
▼ + stars: | 2023-10-27 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

The bond market is stirring. After years of low interest rates, yields throughout the vast global bond market are soaring. And in the bond market, traders and central bankers drove longer-term yields below 1 percent. Those depressed bond market yields fluctuated but never reclaimed their past heights. Interest rates were so low for so long that businesses and investors barely needed to think about them.

Organizations: Federal Reserve, Bear Locations: Washington, Bear Stearns

☆ The Gems Hiding in Plain Sight in the Treasury Market
▼ + stars: | 2023-10-20 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: 1 min

You didn’t have to be a financial wizard to get a safe return of more than 7 percent on your money for decades to come. All you had to do was buy a 30-year U.S. Treasury bond in the last nine months of 1994. There were treasures elsewhere in the investment-grade bond market. Tax-free municipal bonds were paying more than 6 percent, and corporate bonds carried rates that were even higher. While interest rates have risen appreciably, I’m not confident that we are experiencing a 30-year peak with bargains galore, as the fortunate bond buyers of 1994 did.

Organizations: Treasury

☆ The Dollar Still Has Plenty of Swagger
▼ + stars: | 2023-09-22 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +1 min

Earlier this year, before the rebound, spot currency traders made good money wagering that the dollar would decline from the 20-year highs it reached in 2022. And while the dollar dominates world trade, a host of nations, including China and Russia, are maneuvering to unseat it. But the Federal Reserve’s decision on Wednesday to hold rates at an elevated level is likely to buttress the dollar in foreign exchange markets. Still, an underlying truth abides: The dollar remains the linchpin of the global economy. It is the currency around which nearly all others revolve, the world’s haven in times of trouble — even when that trouble emanates from the United States itself.

Persons: — Locations: China, Russia, United States

☆ The Market Is Stuck Until the Fed Is Done
▼ + stars: | 2023-09-16 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +2 min

But the short-term interest rates the Fed controls directly have already risen sharply since early 2022 — from near zero to a range of 5.25 to 5.5 percent now. And while a rate increase may be unlikely this month, for short-term traders, the big questions remain: Is the Fed done, and when will interest rates finally decline? An Unheralded RecordFor one thing, the interest rate environment is unusual. Short-term rates — specifically, for 3-month Treasuries — are higher than those of longer duration — particularly, for 10-year Treasuries. In financial jargon, this is a classic “inverted yield curve,” and it often predicts a recession at some point in the future.

Organizations: Blue, Economic, Wolters Kluwer, Wall, Investment

☆ Why the Stock Market’s Summer Doldrums Are Not a Problem
▼ + stars: | 2023-08-25 | by ( Jeff Sommer | More About Jeff Sommer | ) www.nytimes.com time to read: +2 min

Briefly put, short-term rates — those embodied in money-market funds as well as credit cards — are a direct consequence of the Federal Reserve’s campaign to reduce inflation. The Fed has been tightening monetary policy, mainly by raising the short-term rates it controls, the best known being the federal funds rate. The downgrade of U.S. Treasury debt by the Fitch Ratings agency also contributed to the run-up in rates on Treasury securities. In addition, the balance of supply and demand in the bond market has been tilting in a way that is contributing to higher rates. The Treasury has been auctioning an unusually large amount of debt, bulking up its resources after the brinkmanship of the debt ceiling crisis this spring.

Persons: Jackson, Jerome H, Powell Organizations: Federal, Treasury, Fitch Locations: Japan, China

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