News

...Though inflation is down from its high, headline Consumer Price Inflation (CPI) read 7.1% in November and was still 6.0% factoring out food and energy ⁶. Inflation is still very far away from the Federal Reserve’s (Fed) desired level. Most of the major economic indicators are showing declines and this includes weakening Industrial Production, Capacity Utilization, Factory Orders and Durable Goods Orders. Many of these economic indicators benefitted from the excessive stimulus that was borne from Covid. Even though the federal government had distributed significant portions of this stimulus in previous years, some of the largesse was still working through the states’ spending systems and this supported economic activity, consumer and business spending and, ultimately, inflation.

When the team returned on January 3rd and resumed our standard morning market debrief, Nick Gentile pointed out that the consensus is looking for a soft and quick recession. As market professionals, we do not claim to have a unique vision on the immediate future of the economy, but we do know that the consensus is more often wrong than not. As a practical matter, the Fed will not likely pause from hiking the Federal Funds rate until such a time that they feel inflation is under control. In our opinion, the equity and bond markets...

Read Full Article