Market and Economy

Diligence is the mother of good luck ~ Benjamin Franklin

Building Benjamins

Will Russia Invade the Ukraine? One Reason it will not.

One Reason it will not: US and NATO provide a diplomatic solution to Russian concerns over Ukraine eventually being admitted to NATO

Building Benjamins

Hot Spots – Russian Invasion of Ukraine? NATO? – China Reemergence, Century of Humiliation, Taiwan

• Russian Invasion of Ukraine?
• NATO response?
• Historical borders were fluid.
• Invasion is morally unjustified and would be a humanitarian disaster.
• China Reemergence after Century of Humiliation.
• Long-Term view of China.
• China has stated clear intentions to incorporate Taiwan over time.
• Invasion is morally unjustified and would be a humanitarian disaster.

Building Benjamins

Higher Long-Term Rates, Tapering, and the Fed raising Short-Term Rates. Negative Impact on Stocks.

• Should head towards 5% over time.
• Tapering marks the end to Quantitative Easing.
• Fed is expected to raise Short-Term Rates 2 to 4 times over the next 15 months by 0.25% each time.
• Negative Impact on Stocks.

Building Benjamins

7 Reasons to Raise Cash

• Long-Term Interest Rates Headed towards 5%
• Federal Reserve (The Fed) is tapering, stopping its bond buying program
• The Fed is raising Short-Term Interest Rates
• Political Gridlock, No Stimulus Bill Passed
• China Reemergence
• Russia NATO Ukraine
• Valuation

Building Benjamins

December 2021 Economic and Market Review

Economic and Market Review January 1, 2022 Year in Review A year after Covid-19 changed the course of travel, socialization, and financial markets, 2021 witnessed a much quicker rebound than had been anticipated. The equity market upswing caught many by surprise as it was not anticipated. Inflation brought about by supply constraints and rising labor…

Building Benjamins

Raising Short-Term Interest Rates and Tapering. Will the Fed follow through?

• Fed (The Federal Reserve) minutes indicate possibility of Fed short-term rate hikes.
• Possible accelerated tapering that would result in shrinking Fed’s swollen balance sheet.
• Higher short-term rates could dent business and consumer confidence.
• Fast tapering could cause long-term rates to go up.
• The combination would be negative for bonds, stocks and the economy.
• Unlikely, Fed will persevere if markets have severe negative reaction.
• The tightening of short-term rates will probably be delayed, and the Fed will let inflation run.

Building Benjamins

Inflation Inflection. Inflation will drive the inflection change for value to outperform growth.

• Inflation Inflection.
Inflation will drive the inflection change for Value Stocks to outperform Growth Stocks.
• Rising inflation will cause a contraction of high price to earnings and price to sales ratios.
• Growth will underperform Value as this occurs.
• Growth has gone up over 500% since September 2008 while Value is up 186%. This is a reverse of the Period before September 2008 to March 2000 where Value beat Growth.
• Growth outperformed Value from 1990 to March 2000, the peak of the internet bubble.

Building Benjamins

Powell: Fed will discuss speeding up bond-buying taper at December meeting.

• Federal Reserve Chairman Jerome Powell said he expects policymakers in December to discuss accelerating the timetable for the tapering of monthly bond purchases.
• Speaking before a Senate panel, he said tapering could wrap up “a few months sooner” than anticipated. That would open the door to interest rate hikes thereafter.
• Powell also said, “it’s probably a good time to retire” the word “transitory” to describe inflation.

Building Benjamins

November Economic and Market Review

Economic and Market Review November 30, 2021 Omicron Stands to Stall Global Recovery The onset of the most recent Covid variant, known as Omicron, stands to stall a global economic resurgence that has been gradual and fragile. In addition, the World Health Organization (WHO) reported that the new variant might pose a greater reinfection risk…

Building Benjamins

Tapering at the Hotel California

Tapering is the presumed end to Quantitative Easing (QE) which helped balloon the Fed’s balance sheet from $860 Billion to $8.6 Trillion. Yes, please 10X my balance sheet. The Fed is facing its Hotel California moment for the third time. Will it really taper this time or will the Fed let inflation run? You can check out anytime you want, but you can never leave.

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