Long Bond, VIX, & Commodities Show Reflation Trade Is Over

The stock market had another small drawdown on Wednesday as it is down about 2.5% from its all-time high. The last 5% decline was in June 2016 which is about ten months ago. The minimal size of the stock market correction is remarkable when you look at in the context of other markets. As I…

Atlanta Fed Forecast Uses More Hard Data

Before I get into a discussion of the latest market action, I will make a clarification of an aspect which I wasn’t aware of. As I have mentioned a few times in the past few weeks, the NY Fed’s Nowcast Q1 GDP growth estimate and the Atlanta Fed’s Q1 GDP Now growth estimate are far…

Are Small Businesses Overly Optimistic?

There has been an increase in stock prices since the election based on optimism about the Trump administration. Investors focused on the potential tax cuts, regulatory reform, healthcare reform, and infrastructure stimulus. The fact that investors were swooning over a politician’s rhetoric showed how far the hope trade had gotten in this cycle. The chart…

Reflation Trade #3 Is Putrid

Monday’s trading was yet another example of a day where the market went up and the VIX went up. There seems to be quite a few of these occurrences happening as the market hasn’t fallen much, but the VIX occasionally catches a bid because of various potential worries such as geopolitical or monetary policy concerns.…

Morgan Stanley Predicts 30% Rise In S&P 500

On Monday, Tesla passed General Motors in terms of market cap, making it the highest valued automaker. This article isn’t about Tesla, but Tesla serves as a red flag for how out of whack valuations have become. Tesla isn’t even the leader in electric vehicles sales which is its niche. The firm lost $675 million…

Sub 1% Q1 GDP Growth?

The latest statement by Paul Ryan, the Speaker of the House, was that tax reform could take longer to get done than healthcare reform. That’s an interesting way of putting it since healthcare reform still hasn’t gotten done. The first step of healthcare reform, which is voting on it in the House, wasn’t even completed.…

Dumb Money Bulls Vs. Smart Money Bears

In this article, I will discuss how the dumb money is driving the stock market higher. When reviewing the behavior of dumb money investors, human psychology comes into play. The reason psychology is more important in describing the behavior of dumb money investors than smart money investors is because professional investors are aware of the…

What The Fed Means When It Says Stocks Are Expensive

As I mentioned, the Fed said in its Minutes that valuations were ‘quite high.’ CNBC decided to do an analysis of how stocks performed one year after the Fed has said stocks were expensive because the Fed rarely comments on valuations. As you can see in the chart below, the Fed has commented on how…

Fed Discusses Balance Sheet Reduction In Minutes

In the last Q&A Yellen did, she mentioned that the FOMC members didn’t want to consider the unwinding of the Fed’s balance sheet to be a part of the hawkish policy of rate hikes because the Fed had no experience with unwinding its balance sheet. She said communicating policy on the unwind of the balance…

Blowout ADP Report

In this article, I will review the latest economic reports and review some data on buybacks. The ADP private sector payrolls report came in better than expected, but there was a large negative revision in the February report. The ISM non-manufacturing report missed expectations. This could be sign the strong survey data trend is starting…

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