Following China’s 20th Party Congress in mid-October, most experts’ assessments have been overwhelmingly negative. As was widely anticipated, Xi Jinping was re-elected as party general secretary for an unprecedented third five-year term. Does this signal a "Great Leap Backward" for China and how will it impact the global economy?
Nearly two thirds of economists foresee a U.S. recession in 2023, according to a recent Wall Street Journal survey. Economists are skeptical that the Federal Reserve can keep raising interest rates to cool inflation without causing businesses to lay off workers.
One of the long-standing public policy disagreements between Republicans and Democrats is over when is it appropriate for government to intervene in the economy. Republicans are prone to criticize government programs as being wasteful and inefficient, while Democrats maintain they can help fill gaps that the private sector cannot or will not address. The Infrastructure Investment and Jobs Act (IIJA), enacted one year ago, is an area of bipartisan agreement.
Following the midterm elections, pundits are scrambling to explain how Republicans failed to capitalize on the results, when several issues favored them. Heading the list were voter worries about high inflation, the weakening economy and rising crime. How then were Democrats able to overcome such formidable obstacles?
The Federal Reserve’s decision to boost the federal funds rate by 75 basis points at its November meeting was widely anticipated by market participants, following a disappointing September inflation report. Instead, investors have focused on the possibility that the Fed may slow the pace of policy tightening at subsequent Federal Open Market Committee (FOMC) meetings, which fueled the best monthly return for the Dow Jones Industrial Average since 1976.
The Federal Reserve and policy makers abroad were correct in pinpointing supply chain disruptions as the principal cause of the surge in goods prices last year. As pressures have eased, so have U.S. goods prices. So, why has inflation remained high?
With the midterm elections upon us, polls show that inflation looms as the top issue on voters’ minds. Indeed, it is the biggest obstacle Democrats face to retaining control of both houses of Congress.
Although the long-term correlation between prices for crude oil and natural gas is low, the magnitude of the price divergence today is unusually high. Consequently, why is it happening and what does it spell for the respective economies and financial markets?
A myriad of issues—Fed policy, inflation, recession in Europe, and a weakening of China’s economy—will likely cause global markets to stay volatile amid unusually high uncertainty.
The past few years suggest we may be entering a period of “Great Volatility” as the global economy has been buffeted by the COVID-19 pandemic, Russia’s invasion of Ukraine, and the effects of climate change. While these forces will likely lead to weakness ahead, decisions that central banks take to address high inflation can mitigate and limit the ultimate impact of these shocks.
A weakening of China’s property market would have spill-over effects to China’s main trading partners in Asia, Europe, and North America and would likely reverberate throughout global markets.
Some experts think that today’s energy crisis may become worse than the 1970s oil shock. Will Russia cut back on the contracted supplies of natural gas to Europe? If so, governments will need to secure supplies from global sources across the EU and to prepare gas rationing programs.
For the first time in the post-war era, the global economy has been buffeted by two shocks—the worst public health disaster in one hundred years combined with Russia’s invasion of Ukraine. What should investors do amid the heightened uncertainty?
COVID-19, international war, and inflationary concerns have all created a ripple effect through the stock market and the economy. It’s still uncertain whether the United States will fall into a recession; however, looking at certain trends from our history allows us to gain insight on what we may expect in the near future.
Markets are likely to stay volatile, and we are maintaining a moderate overweight in risk assets on the view that markets have priced in higher interest rates and a soft economy.
As we reach the midpoint of the year, investors find themselves confronting a highly challenging environment, with the Federal Reserve now emphasizing the urgency of bringing inflation under control over maintaining “maximum” employment.
At a time when both U.S. stocks and bonds have sold off significantly, the U.S. dollar has exhibited considerable strength against most currencies. Thus far, U.S. policymakers have not expressed concern about the dollar’s strength, as it helps to temper high inflation. But, it could become an issue if a deteriorating trade imbalance weakens the U.S. economy at some point.
Many investors feel considerable uncertainty about what to do with their portfolios. Weakness in markets can be unsettling, but investors should avoid short-term decisions that may compromise long-term goals and objectives.
Periods of market volatility are often reminders for investors to ensure investment strategies and risk tolerance are properly aligned. In this episode, we discuss recent market volatility, its implications for investors, and considerations for portfolio positioning going forward.
Investors should monitor the state of emerging economies, who often feel the fallout from Fed tightening when the U.S. economy is weakening and in several instances have caused the Fed to back off raising rates.
Returns for emerging markets equities have trailed those in the U.S. considerably for more than a decade now, while emerging markets bonds have fared relatively well versus U.S. bonds until this year.
In the wake of Russia’s invasion of Ukraine, the need for a clear international strategy has heightened. The U.S.’s response to the Russian invasion has been formidable, but it has yet to formulate a clear approach for China and allies in Asia.
Several factors—including elevated inflation and Russia’s invasion of Ukraine—have the potential to impact the strength of the U.S. economy in the coming year.
Investors need to weigh how good of an investment vehicle housing may be going forward. The main concern today is that housing is becoming increasingly unaffordable for many Americans, a result of record home price appreciation in the past two years coupled with surging mortgage rates this year.
With federal debt at record levels, inflation at four-decade highs, and the Federal Reserve about to tighten monetary policy, federal spending must be brought under control. How can President Biden move ahead with increased defense spending while also focusing on domestic priorities?
The debate over SALT deductions raises fundamental questions about the taxation policies of high- and low-tax states. It also involves a judgment about whether the combined federal-state-local tax for the states most affected by the deduction is unduly burdensome.
While investors currently are focused on the near-term impact of Russia’s invasion of Ukraine on the global economy and markets, the history of the Cold War suggests it may also have significant long-term repercussions.
History suggests that whenever there is geopolitical conflict, financial markets have reacted the most when energy prices spike and the Fed tightens monetary policy.
The impacts of Russia’s invasion of Ukraine have added unease to already volatile financial markets. Investors grappling with higher inflation and Fed tightening are now faced with further uncertainty that will undoubtedly keep financial markets on edge.
The case for expanded immigration is straightforward: It provides a means to ensure long-term economic growth while tackling labor market shortages and high inflation.
The average 30-year fixed-rate home loan has increased to 3.6% from 3.1% at the end of last year, which is the highest level since the coronavirus pandemic struck two years ago. This raises the question about how the U.S. housing market would respond to ongoing Fed tightening.
After the past two presidential elections, there has been a growing narrative about “two Americas.” One consists of thriving urban areas that voted overwhelming for Hillary Clinton and Joe Biden and the other of “hurting” rural communities that went heavily for Donald Trump.
While skeptics believe the Fed is behind the curve, investors have not lost confidence in it. But if bond yields and the dollar were to drift higher, the stock market could encounter turbulence in the coming year after smooth sailing over the past seven quarters.
Looking at the year ahead, several questions remain. Will the coronavirus pandemic finally be reined in? How will bond yields fare as the Federal Reserve tightens monetary policy? And, will risk assets continue to outperform?
Are inflation pressures likely to moderate, or is higher inflation here to stay? And, should the Fed be doing more? This episode discusses how investors may consider positioning their portfolios in light of these risks.
Why should President Biden do what no other U.S. president has done and indicate he is on board for the Fed to raise rates in an election year? The argument is based on both economic and political considerations.
As political leaders work to shift reliance on fossil fuels to alternative forms of energy, a major question is how to execute this without creating an energy shortage and higher inflation.
Investors do not appear rattled by inflation news, and 10-year Treasury yields are little changed at just over 1.5%, implying investors are willing to accept a negative real yield of more than 2 percent to hold government debt.
Global energy prices have surged to their highest levels in several years. What are the sources of these price pressures? And what can policymakers do to alleviate them?
The term “global supply chain disruption” has been cited frequently as one of the main consequences of the COVID-19 pandemic. But what exactly does the term mean, and why does it matter?
Even though we see the economic outlook as generally favorable after a strong stock market run and re-opening activity, we recognize that market volatility may increase, and some investors may be turning cautious—due to a variety of risk factors.
Evergrande, China's largest property developer, faces a possible default. A selloff of China's property market would have major repercussions for China's economy—and perhaps the global economy.
With economic activity back near pre-pandemic levels and relief programs about to expire, the Fed now faces the challenge of interpreting full employment to determine monetary policy.
The logic is that the over long periods the valuation of the stock market should mirror the performance of the economy. However, there can be significant deviations in the interim owing to cyclical forces.
When the international monetary system shifted from a fixed to a floating exchange-rate regime 50 years ago, it was a milestone event that marked the end of a prolonged period of low inflation, strong economic growth, and financial stability.
Since Xi Jinping became China’s leader in 2012, he has taken steps to reverse the trend of allowing China’s communist system to evolve into a more market-oriented model in which private businesses coexist alongside state-owned enterprises.
Investors have faced a nearly 40 basis point drop in Treasury bond yields over the past month. Two competing explanations have been put forth, and it is important to understand both because they have different implications for financial markets.
Forecasts of a powerful U.S. recovery this year appear on target. Looking ahead, the key call for investors will be whether the pickup in inflation will be temporary or sustained.
Most observers expect at least a temporary surge in inflation as the economy reopens from the COVID-19 pandemic, but there is greater uncertainty about the outlook beyond this year.
The bottom line is that in addition to their inherent risks, cryptocurrencies now face added regulatory burdens. For these reasons, we believe privately issued digital currencies should be considered speculative instruments.
As President Biden will find out, the easy part of governing is identifying worthy public needs; the hard part is paying for public programs and making sure they deliver on their objectives.
The case for the Federal Reserve to taper bond purchases and to raise interest rates will become compelling well before its expected timetable of 2024.
The policy shift that is occurring is an opportunity to test the precepts of Keynesian economics that embrace the government’s role in the economy versus supply side policies that favor tax cuts and deregulation.
The U.S. economy is poised for a powerful expansion but markets are likely to be choppy as the economy accelerates and inflation approaches the Fed's threshold.
Positive news surrounding the COVID-19 vaccine rollout has led to a rally in oil prices, which were up 75% from November of 2020 through March of 2021. With questions about demand lingering, Saudi Arabia announced a surprise reduction in oil production. OPEC+ has stated that they support a reduction of global oil inventories, which is expected to provide a tailwind for oil markets going into the first half of 2021. Now, we wonder, is another commodity super cycle next?
Equity markets have bounced back from the initial impact of the COVID-19 pandemic in the first quarter of 2020. Market recovery continues to date due to action from the Federal Reserve and Congress. Now, the focus moves to valuation and, in particular, if equity markets are overvalued.
In our inaugural podcast, we look back at the extraordinary volatility in credit spreads, examine what the impact has been on Investment Grade credit markets, and what we think lies ahead in these markets.
The $1.9 trillion COVID stimulus plan has been greeted enthusiastically by investors as the U.S. stock market has set record highs. However, with the U.S. budget deficit reaching extreme levels, some economist are concerned the U.S. economy could overheat and lead to inflation.
Fort Washington's Senior Economic Advisor Nick Sargen shares a 2021 outlook for the economy and markets and how we're positioning investment portfolios.
One of the main objectives of the incoming administration is to counter growing income inequality in America. However, investors are likely to judge the Biden administration’s policies primarily by how they impact the U.S. economy overall.
Congress crafts a plan providing much-needed relief for COVID-19. Several factors coalesced encouraging Congressional leaders to reach an agreement but it may be difficult to sustain the spirit of compromise.
With the most contentious election behind us, our Senior Economic Advisor provides a recap of the Trump administration and the key policy changes. Looking ahead, Nick assesses Biden's fiscal plan and discusses the intertwined effects of fiscal policy and Fed actions as well as U.S. trade policy and our relations with China.
Listen to a replay of the November 11th Beyond the Elections: Assessing Looming Policy Changes program with international economist and author Nicholas (Nick) P. Sargen, Ph.D.
The costs of outsized deficits may not be apparent now, but they will become more visible in the future if federal spending is not brought under control.
The U.S. economy made huge strides in recovering from business shutdowns but without the slowing of COVID-19 the economy is still not out of the woods. Our Senior Economic Advisor reflects on the third quarter, previews what’s on the horizon for the balance of 2020, and expands on possible changes in fiscal policy if Biden wins the November elections.
The U.S. stock market is in correction territory and the issue investors now face is whether the pull-back represents a buying opportunity or is the harbinger of more to come.
A review of the Fed's monetary policy framework resulted in a new way to target inflation and a broader definition of full employment. Senior PM Dan Carter explains the new strategies and challenges they may present.
Joe Biden intends to unwind key provisions of the Tax Cuts & Jobs Act to finance new initiatives as promised during his campaign. Surprisingly, thus far, the stock market has not reacted even though Republicans have decried the proposal and polls show Biden with a decisive lead. This article explains why.
The five largest U.S. stocks returned 35% YTD as of late July, compared with minus 5% for the remaining stocks in the S&P 500 index, and the outperformance of this select group has resulted in a large valuation premium for them relative to the rest of the market. This has caused some investors to worry the market is on shaky ground. We believe a replay of the tech bust in 2000 is unlikely; however, the risk-reward trade-off for these stocks has become less favorable as they have become a “crowded trade.”
The U.S. dollar experienced a remarkable run over the past decade. March became the turning point coinciding with unprecedented U.S. policy actions to combat COVID-19. The dollar is likely to remain under pressure for the balance of the year and into 2021.
There is a high degree of uncertainty about how the economy will fare in the balance of 2020 and into 2021. Many investors are upbeat that it is headed for a quick recovery, but most economists believe recovery will be gradual and uneven following an initial bounce. What weighs on Fed officials is the possibility of a second wave of coronavirus cases that could hinder the re-opening of businesses.
The May jobs report surprised many investors who were prepared for a large increase in the jobless rate. While the news was a relief to the Federal Reserve, the numbers underestimate the full impact of COVID-19 on labor. Even though the U.S. stock market is back to levels before the pandemic, the path to recovery is still unclear.
OPEC is being reborn, and despite the tremendous drop in demand for oil and oil products, long-term fundamentals for oil have improved as the price of the commodity has collapsed. Allocating to high quality oil-exposed equities is beginning to look like a compelling opportunity for long-term investors.
OPEC is being reborn, and despite the tremendous drop in demand for oil and oil products, long-term fundamentals for oil have improved as the price of the commodity has collapsed. Allocating to high quality oil-exposed equities is beginning to look like a compelling opportunity for long-term investors.
Small businesses have been significantly affected by the lockdown due to the coronavirus pandemic. The federal government has prioritized these businesses, passing a second bill supplementing the Paycheck Protection Program (PPP). However, opinions on PPP vary. In the first quarter, many larger cap stocks outperformed small cap stocks, but small caps have shown signs of recovery.
While the U.S. government’s efforts to combat COVID-19 will likely lead to a post-war record budget deficit, bond yields have fallen to record lows amid a global recession. The long-term prognosis is problematic, however, because deficits are likely to remain abnormally high this decade.
While the U.S. stock market reversed about half of its prior sell-off, it is likely to remain volatile. There is considerable uncertainty about how long it will take to reopen businesses fully and how severe the fallout of coronavirus will be on the global economy and commodity prices.
Investors are now assessing when recovery will begin and what shape it will take, posing the question: What lies ahead? The answer hinges on the spread of the coronavirus and how quickly businesses and jobs can be restored.
Jamie Wilhelm, Craig Dauer, Dan Gibson, Jason Ronovech, Austin Kummer
The coronavirus situation continues to evolve rapidly, and the full impact of the virus is unknowable at this point. Odds are high that volatility will continue, and our equity managers break down what this means for Fort Washington’s equity strategies.
The coronavirus shock is different from previous ones. However, the four-step framework we use to analyze the shocks on markets is still relevant today.
Sudden changes in the municipal market over the past week occurred because of the extreme volatility in the markets since the outbreak of the coronavirus. A senior portfolio manager breaks down the one-week change in municipal yields and provides an update on the market.
The conflict over oil and growing worries about COVID-19 marks the first time the global economy experienced simultaneous supply shocks. Markets are now signaling a tipping point has been reached with the global economy on the cusp of recession.
Investor sentiment about the coronavirus has shifted as the virus spreads. While forecasters have been lowering projections for global growth in 2020, we see a U.S. recession as unlikely and are positioning balanced portfolios close to their strategic allocations.
The U.S. stock market’s surge since October has been linked to the Fed’s balance sheet expansion, but the main driver is expectations that the global economy will improve. The coronavirus scare is posing a test that will likely be temporary.
With the S&P 500 Index up by 380% since the bull run began in March 2009, investors are wondering what can stop it. This commentary examines the usual suspects – risk of higher interest rates and recession – as well as uncertainty about the upcoming elections.
For the past 18 months, the greatest risk to the global economy and markets has been the ongoing escalation in the trade conflict between the U.S. and China.
Nick Sargen provides his takeaway from a conference sponsored by the Center for Financial Stability in Washington, D.C. that featured the global economy.
Senior Economic Advisor Nick Sargen shares his insight on monetary policy easing, trade tensions and the impact on the U.S. economy, and possible investment implications.
Plunging bond yields and heightened stock market volatility have caused investors to worry. Our view is a further slowing of the economy is likely, but we do not yet see signs of recession.
Fed-fueled investor optimism could be overstated and running head long into slowing earnings growth and reignited trade war tensions. This article cuts to the chase on the major drivers and potential obstacles for today’s markets.
Investment grade corporates were the worst performing major asset class in May of 2018, but now they have generated strong absolute returns of more than 10% and also outperformed both equities and other fixed income sectors on a relative basis.
Do investors see the glass half full or half empty? Equity investors are more optimistic while bond investors are more wary of the economic outlook as explained in our midyear outlook.
Ten-year yields currently are around 2.1%, their lowest level since mid-2017, and about 115 basis points below the high of 3.25% reached last November.
Thus far in 2019, the municipal market has been one of the better performing sectors within the broader bond market, outperforming Treasuries and IG corporate bonds on a total return basis.
Following a remarkable run from November 2016 through September 2018, the U.S. stock market ended last year with the steepest quarterly decline since the 2008 Financial Crisis.
After rising to a record high in September, the U.S. stock market experienced a steep sell-off in October. Recent market volatility could be a preview of what’s in store for next year.
U.S. trade policy now appears headed for a showdown with China, as the administration is set to announce duties on an additional $200 billion of Chinese imports.
In July, FERC offered up another surprise to the MLP market, after already causing turmoil in March when, during market hours, they announced a major policy change.
Within investment grade corporates, intermediate corporates — defined as 5-10 year maturities — may offer the most attractive risk-adjusted return potential.
Two developments, the G-7 meeting in Canada and the historic summit between President Trump and Kim Jong Un, have dominated the news in recent days. Yet, global markets have not reacted to either development.
The Treasury bond market has come under scrutiny as the 10-year yield pierced 3% last week, while the yield curve has flattened considerably over the past year.
The U.S. dollar has come under pressure this year after steadying in late 2017, even though economic data have been supportive and the Fed is expected to raise interest rates several times.
With the passage of a Senate version of a tax bill that is close to the House bill, the stage is set for the biggest overhaul of the U.S. tax code since the Reagan era.
As communities begin the arduous task of assessing losses and rebuilding, we can begin to sift through the numbers to get a sense of the damage and potential impact on select financial markets.
The U.S. dollar has weakened against most currencies this year and especially against the euro. This flies in the face of forecasts that called for it to strengthen.
Markets were unusually calm in the first half of this year even though the U.S. economy grew less than expected and healthcare legislation stalled, which has delayed passage of a tax bill.
Theresa May’s decision to call an early election as Prime Minister has come back to haunt her: Labor Party leader Jeremy Corbyn mounted a credible campaign that denied the Conservative Party a parliamentary majority.
Emmanuel Macron’s election as President of France has buoyed European markets, as it is the third election this year in which populist candidates have been defeated.
The “Trump Trade” fades following President Trump’s surprise victory on November 8, investors responded by buying equities and other risk assets, while treasury yields and the dollar surged.
Donald Trump’s surprise victory has unleashed animal spirits, with U.S. stocks and the dollar surging as investors anticipate a pro-growth strategy and an end to government dysfunction.
Notwithstanding adverse political news at home, the Trump rally has continued amid favorable economic news and investor optimism about pending corporate and personal income tax cuts.
Donald Trump ran for office on restoring lost jobs in manufacturing by renegotiating trade deals and imposing tariffs on imports from countries that are deemed to hurt American workers. Now that he is President, market participants are focusing on what he will do.
The immediate effect of Donald Trump's victory is likely to be heightened market volatility while market participants will assess the economic policies of the Trump Administration.
The rally in risk assets continued in the third quarter driven by expectations that near record low interest rates will continue for the foreseeable future.
Donald Trump unveiled his plans for the U.S. economy. Specifically, he pledged to restore growth of 3.5% per annum and to create 25 million jobs over the next decade.
Deng’s approach combined strategic planning by the central government with decentralized decision making at the regional and local levels.
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