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☆ The stock market is ignoring the yield curve. History says that's a bad idea
▼ + stars: | 2023-06-23 | by ( Jesse Pound | In Jesse-Pound | ) www.cnbc.com time to read: +3 min

The 2-year Treasury yield was trading at 4.752% on Friday, more than 100 basis points , or 1 percentage point, above the 10-year Treasury yield . The yield curve is considered inverted when short-term rates are above long-term ones, a phenomenon that has almost always predated a recession. 10Y2YS 1Y mountain The U.S. Treasury yield curve has become deeply inverted over the past year. But despite the deeply inverted curve, stocks are rallying — even the economically sensitive industrial names. He also drew a connection between the current yield curve and the market conditions in the late 1970s.

Persons: —, Chris Verrone, Verrone, Goldman Sachs, Wolfe, Chris Senyek, Jerome, Senyek, Paul Volcker, — CNBC's Michael Bloom Organizations: Treasury Locations: U.S

[1/2] The U.S. Capitol dome is seen from the Russell Senate Office Building on Capitol Hill in Washington, U.S., April 19, 2023. Despite the consensus on lowering inflation, the Fed is also reaching a point where opinions about the need for and timing of additional interest rate increases may start to diverge. In large part that job has fallen to the Fed, but it is a central bank of Biden's making. If the current crop of nominees is approved five of seven board members would be Biden appointees. The Fed under Powell has raised interest rates faster than at any time since former Fed Chair Paul Volcker's inflation fights of the 1970s and 1980s.

Persons: Sarah Silbiger WASHINGTON, Jerome Powell, haven't, Democrat Joe Biden, Donald Trump, Philip Jefferson, Lisa Cook, Adriana Kugler, Powell, Biden, Preston Mui, Mui, Paul, Howard Schneider, Jason Lange, Dan Burns, Andrea Ricci Organizations: U.S, Russell Senate, REUTERS, . Federal, Democrat, Republican, Federal, of Governors, World Bank, Fed, Financial, America, Reuters, Biden, Trump, Black Americans, Thomson Locations: Russell, Washington , U.S, U.S, Biden's

☆ Economists are torn on whether the Fed’s pause will backfire
▼ + stars: | 2023-06-14 | by ( Elisabeth Buchwald | ) edition.cnn.com time to read: +3 min

Fed Chair Jerome Powell said the rate hike pause will give officials more time to evaluate the effects rate hikes have had on the economy so far. But he left the door open for the possibility of more rate hikes at future meetings. “Every time they relaxed rates inflation would ratchet up,” said Michael Bordo, an economics professor and director of the Center for Monetary and Financial History at Rutgers University. Many economists agree the Fed is not confronting the extreme dilemma Paul Volcker faced during his time as Fed Chair from 1979 to 1987. The Fed’s pause “doesn’t necessarily have adverse implications for inflation,” he said.

Persons: Jerome Powell, ” Powell, ”, Michael Bordo, Paul Volcker, “, Donald Kohn, Powell, Bordo, George Selgin Organizations: New, New York CNN, Federal, Center for Monetary, Rutgers University, Fed, CNN, Cato Institute Locations: New York

☆ Here are stocks to own to take the debt ceiling, bond market out of your investing equation
▼ + stars: | 2023-05-21 | by ( Jim Cramer | ) www.cnbc.com time to read: +18 min

Are the travails of the bond market, like Macbeth expounds, a "tale told by an idiot, full of sound and fury, signifying nothing?" The billionaire class — so incorrectly sought after by the media — so often seems to use the bond market as a sort of intellectual cudgel. That's why I always start my discussion on bonds with the simple query of "where are the layoffs, not forget about stocks, think fixed income." Here the bond market polices only those companies that haven't pivoted to making a profit. They, among all sectors, could be pummeled by the bond market freeze and by the consumers' paralysis.

☆ The Fed likely won't cut rates this year. Why that's good news for markets
▼ + stars: | 2023-05-14 | by ( Krystal Hur | ) edition.cnn.com time to read: +5 min

Although a pause in interest rate hikes appears likely, cuts may be farther off than some believe. Still, investors have remained hyper-alert for signs that the central bank could let up its brisk clip of interest rate increases. The central bank also opened the door to a pause, accelerating bets that the Fed will hold rates steady at its next meeting in June and cut rates as soon as July. The Fed is unlikely to cut rates in JulyExperts say that the Fed won’t cut rates anytime soon for two key reasons: Inflation remains sticky, and the economy has stayed strong. that’s not to say that a Fed rate cut this year is completely out of the cards, says Nicole Webb, senior vice president at Wealth Enhancement Group.

☆ Gallup poll: Americans have low confidence in Biden, Powell and Yellen on the economy
▼ + stars: | 2023-05-09 | by ( Matt Egan | ) edition.cnn.com time to read: +4 min

Even with the unemployment rate tumbling to historic lows, nearly half (48%) of Americans say they have almost no confidence in Biden on the economy. Only 36% of Americans say they have confidence in Powell on the economy, a new low during Powell’s six-year tenure as Fed chief, while 28% say they have almost no confidence. The poll, taken April 3 to April 25, demonstrates how the anxiety caused by high inflation continues to overshadow the nation’s surprisingly strong job market. The economy added 253,000 jobs in April, dropping the unemployment rate to 3.4% — tied for the lowest since 1969. Gallup notes that confidence in leaders tends to rise and fall along with the fortunes of the economy.

☆ Premarket stocks: The Fed could be on the verge of repeating its 1970s mistake
▼ + stars: | 2023-05-08 | by ( Julia Horowitz | ) edition.cnn.com time to read: +6 min

But Gary Richardson, a Federal Reserve historian, is worried policymakers — now contemplating taking a breather — still risk repeating mistakes from that era. A premature retreat could cause the Fed to lose its handle on the situation, presenting even grimmer options down the road. Quick rewind: The chair of the Federal Reserve at the time, Arthur Burns, hiked interest rates dramatically between 1972 and 1974. Inflation later roared back, forcing the hand of Paul Volcker, who took over at the Fed in 1979, Richardson said. But the comparisons reveal the high stakes for the Federal Reserve at a moment of acute uncertainty.

As a member of the Fed's Board of Governors a decade ago, Powell called certain possible debt default responses by the Fed "loathsome." Accepting defaulted securities as collateral for Fed loans, or swapping "good" federal debt already held by the Fed for impaired debt held by private investors, would be an extreme variation on the theme - yet one that may prove less "loathsome" than the alternative economic collapse some predict would follow a default. To a central bank, with no budget constraint and an elastic time horizon, it's just a matter of waiting out the politicians. Powell joined the Fed in 2012 from a think tank where he focused on debt and deficit issues. A debt default may pose another tough decision for a Fed chair who's motto could well be to never say never.

☆ Fed Makes 10th Rate Increase and Opens Door to Pause
▼ + stars: | 2023-05-03 | by ( Jeanna Smialek | ) www.nytimes.com time to read: +2 min

When the Fed raises interest rates, it makes it more expensive, and often more difficult, for families to take out loans to buy houses or cars, or for businesses to raise money for expansions. As wage growth sags and unemployment rises, people become more cautious and the economy decelerates further. When Paul Volcker’s Fed raised interest rates to nearly 20 percent in the early 1980s, it helped to push joblessness above 10 percent. Fed staff members, by contrast, think a mild recession is likely this year, Mr. Powell said. Given the possibility of a downturn, the Fed’s recent rate moves are drawing increased scrutiny — including from Democrats in Congress.

☆ CNBC Daily Open: The final hike?
▼ + stars: | 2023-05-03 | by ( Jihye Lee | ) www.cnbc.com time to read: +2 min

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. That happened to be the name of Paul Volcker's autobiography: 'Keeping at It.' Jerome Powell is literally taking a page out of Paul Volcker's playbook," said Conzo. Subscribe here to get this report sent directly to your inbox each morning before markets open.

☆ CNBC Daily Open: One last hike?
▼ + stars: | 2023-05-03 | by ( Jihye Lee | ) www.cnbc.com time to read: +2 min

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. It's Fed Day, the rate-setting Federal Open Market Committee is underway, and investors seem to be holding their breath as the meeting is expected to conclude with another 25-basis-point rate hike. As BlackRock's Chief Investment Officer of Global Fixed Income Rick Reider put it, "This is transitioning to the market's No. Subscribe here to get this report sent directly to your inbox each morning before markets open.

☆ On Inflation, Wages and Tough-Guy Economics - The New York Times
▼ + stars: | 2023-04-28 | by ( Paul Krugman | ) www.nytimes.com time to read: +2 min

Some economics textbooks used to define their subject as the “science of scarcity.” Maybe some still do. Still, a fair bit of economics does involve explaining limits and constraints — for example, that you can’t sustain a Denmark-style system of social benefits without something like Denmark-style tax rates. But accepting the need for hard choices can turn into a kind of trap itself. Many economists, even among progressives, use wage growth as an important indicator of “underlying” inflation (although that’s a slippery concept, as I wrote earlier this week). You need, however, to be careful not to suggest — as Andrew Bailey, the governor of the Bank of England, did — that greedy workers are the villains behind inflation.

☆ The S&P 500 will tank 27% at least, a recession will hit, and more financial disasters will happen, elite investor Jeremy Grantham says
▼ + stars: | 2023-04-14 | by ( Theron Mohamed | ) www.businessinsider.com time to read: +3 min

Jeremy Grantham expects stocks to tank, a recession to bite, and more financial disasters to occur. The S&P 500 will plunge by at least 27%, and could plummet by more than 50%, the GMO cofounder says. Grantham predicts stress on the financial system will lead to further disasters like SVB's collapse. He described the prospect of bubbles bursting in both the stock market and real estate sector as "fairly ominous." "We're by no means finished with the stress to the financial system."

☆ Jeremy Grantham can spot market bubbles. Now he's warning of an 'ominous' bust
▼ + stars: | 2023-04-13 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

“Every one of these great bursts of euphoria, the great bubbles with overpriced markets … has been followed by a recession,” Grantham said. “When the great bubbles break, they do impose a lot of stress on the system,” Grantham said. What’s even more worrying is that this time, bubbles in the stock market and the real estate market are poised to burst simultaneously, Grantham said. The sector, which relies heavily on debt financing, has been hit hard by rising interest rates. Volcker raised interest rates to unprecedented levels to fight inflation in the late 1970s and early 1980s.

There are uncertainties," Boston Fed President Susan Collins said in an interview with Bloomberg Television on Friday. Richmond Fed President Thomas Barkin struck a similar note last week. "When you raise rates there's always the risk of the economy softening faster than it might have otherwise. "People will continue to spend as long as they get paid," said Yelena Shulyatyeva, senior U.S. economist with BNP Paribas. It will, but only at the point at which they stop getting paid" because of a slowing economy and rising unemployment.

REUTERS/Murad Sezer/IllustrationORLANDO, Florida, March 27 (Reuters) - The most extraordinary outcome of the March banking shock would be if the problem dissipated quickly. Many people hope the crisis of confidence infecting global banking this month can be repelled almost as quickly as it appeared. SAVINGS AND LOANS DEBACLEThe easy comparison for any banking or market turmoil is the GFC of 2007-08. But crises don't have to be equal to or worse than the world's most calamitous financial disaster in a century to be extremely damaging. But other banking crises follow the same playbook, even if their outcomes are not as extreme.

☆ Jeremy Grantham warns the 'everything bubble' is bursting, the S&P 500 could nosedive 50%, and a recession looks certain. Here are the elite investor's 12 best quotes from a new interview.
▼ + stars: | 2023-03-25 | by ( Theron Mohamed | ) www.businessinsider.com time to read: +5 min

Jeremy Grantham warned the S&P 500 could tank by up to 50% as the "everything bubble" bursts. Grantham advised against holding US stocks for now, and slammed the Fed for inflating asset bubbles. Grantham blasted the Federal Reserve for inflating asset bubbles time and again, and warned investors against holding US stocks in the short run. And yet, the Nasdaq went down 82%, Amazon went down 92%, and the S&P went down 50%. (Grantham was discussing how the the biggest asset bubbles form.)

The influence of Fed rate hikes "is going to hit...That is how it is designed." As of December officials expected the policy rate would rise to around 5.1% by year's end. The experience of 1970s-era central bankers informed not only the extent of the rate increases, with the policy rate rising 4.5 percentage points from near zero as of last March. None of those reforms prevented SVB from funneling its rapidly growing deposits into long-term government bonds that lost value as the Fed raised rates. The Fed has announced a review of its supervision at SVB to see if warning signs were missed.

☆ The CD Market Is Doing Something Strange—and It Could Have a Big Impact on Your Money
▼ + stars: | 2023-03-14 | by ( ) www.wsj.com time to read: +8 min

CD rates have been rising rapidly over the past year, thanks to the Federal Reserve’s efforts to fight inflation. And there’s potentially a bigger issue at play: Regardless of where you stick your cash, interest rates’ odd behavior suggests the economy may be out of whack. CD rates have climbed dramatically since the Federal Reserve embarked on its campaign to fight inflation, which peaked at nearly 10% late last year. But the Fed faces a conundrum: Hiking interest rates to fight inflation also slows economic growth. Short term rates remain high, while longer term rates—reflecting grim economic prospects in years to come—fall off.

☆ Premarket stocks: From Wile E. Coyote to edibles: Recession forecasts are getting weird
▼ + stars: | 2023-03-13 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +12 min

And for the US economy, it could likely mean a “Wile E. Coyote moment,” Summers said — if we run off the cliff, gravity will eventually win out. AntibioticsWhen describing the state of the economy, Summers doesn’t just rely on Looney Tunes. “Will working people be better off if we just walk away from our jobs and inflation remains 5% or 6%?” Powell replied. Before the Bell: Is it necessary to increase the unemployment rate to successfully fight inflation? In a related action, the government shut down Signature Bank, a regional bank that was teetering on the brink of collapse in recent days.

☆ A recession indicator just flashed its loudest warning ever as Fed chief Powell sees higher rates
▼ + stars: | 2023-03-07 | by ( Filip De Mott | ) www.businessinsider.com time to read: +2 min

A key recession indicator flashed its loudest warning ever on Tuesday. That came after Fed Chairman Jerome Powell said rates will likely go higher than anticipated. The inversion between the 2-year and 10-year Treasury yields hit a record 103.5 basis points on Tuesday, according to Refinitiv data. But for months, the 2- and 10-year yields have been inverted amid growing recession fears, as the Fed continues to tighten policy to rein in inflation. The 2-year yield currently sits at 4.992% while the 10-year yield is 3.968%.

☆ Markets History 101: It’s Time to Buy Bonds
▼ + stars: | 2023-02-27 | by ( James Mackintosh | ) www.wsj.com time to read: 1 min

Even after their big falls, stocks still look very expensive compared to bonds. The market narrative is obvious after a twin inflation and interest-rate shock crushed asset prices: nothing else much matters. The parallels from history are equally obvious. In 1973, the Arab oil embargo trashed the economy and led to sharp interest-rate rises, while in 1980 rampant inflation worsened by another oil shock was accompanied by then-Federal Reserve Chairman Paul Volcker’s aggressive rate increases. Russia’s invasion of Ukraine was followed by the Fed’s fastest rate rises since Mr. Volcker was in charge.

U.S. credit card borrowing rates have never been higher and bank lending standards are at recession levels. Many of his colleagues have doubled down on their view that interest rates may need to stay higher for longer. The average U.S. credit card rate is now higher than it has been in at least half a century. This is easily the highest since the comparable data series was started in 2007.chart"It's triple trouble: credit card rates are at record highs, balances are up 15% over the past year, and more people are carrying credit card debt," said Ted Rossman, senior industry analyst at CreditCards.com. "Credit card debt is one of those things that's easy to get into and hard to get out of," he said.

"It's going to take some time" for disinflation to spread through the economy, Powell said in a news conference following the Fed's latest quarter-point interest rate increase. He said he expects a couple more rate hikes still to go, and, "given our outlook, I just I don't see us cutting rates this year." Rate cuts, they expect, will start in September - a view Powell said Wednesday is driven by the expectation of fast-receding inflation. Since the 1990s, the interlude between rate hikes and rate cuts has varied from as long as 18 months in 1997-1998 to as short as five months in 1995. The Fed, Powell said Wednesday, cannot risk doing too little.

☆ Recession 2023: Jerome Powell's Legacy Will Dictate Inflation, Stock Market, Economy
▼ + stars: | 2023-01-30 | by ( William Edwards | ) www.businessinsider.com time to read: +15 min

This obsession with controlling inflation — and potentially causing serious pain for average Americans — is driven by one major factor: legacy. High inflation eats away at consumers' purchasing power, and persistent inflation seeps into expectations for price and wage adjustments, which further fuel inflation. What's more, the full impact of the Fed's rate hikes have yet to hit. Legacy actsThere are signs that certain Fed officials are ready to dial back on the inflation fight. And navigating such a tricky economy — without throwing hundreds of thousands of Americans out of work — could cement Powell's legacy.

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