01 Sep 2006

Posted at 15:40h in The Friday Brief by
Three weeks after the Federal Reserve ceased its 17th straight quarter point interest rate hikes debate continues as to whether they are finished, even among Fed officials. Minutes released from their latest meeting reveal that members expect core inflation “to decline gradually” and that pausing was a “close call.” Many believe that more increases may well be needed even while saying “the full effect of previous increases in interest rates on [economic] activity and prices probably had not yet been felt, and a pause was viewed as appropriate to limit the risks of tightening too much.”

30 Jun 2006

Posted at 16:16h in The Friday Brief by
The Federal Reserve raised their benchmark interest rate for the 17th consecutive time yesterday which was a surprise to no one.  But in a surprise to many, they suggested for the first time that a pause might be coming soon.  Their statement said “the extent and timing of any additional” rate increases “will depend on the evolution of the outlook for both inflation and economic growth.” Stock markets surged on the news.  The Dow Jones Industrial Average soared to close 217.24 points higher than when the statement was released, a gain of about 2% - its best day in more than three years. The NASDAQ Stock Market was up 3%, its biggest one-day rally since March 2004. Long-term bond yields edged down as prices rose.

02 Jun 2006

Posted at 16:20h in The Friday Brief by
May was very unkind to investors.  The S&P 500 declined 3.1% making it the worst monthly decline since 2004.  The Dow Jones 30 fared a little better, declining by 1.6%.  The NASDAQ has been on its longest decline since 1994.  With inflation fears running high, uncertainty about how close the Fed will come to ruining the economy, high energy and commodity prices, and fears of what will happen in Iran, Iraqall piled on after the Fed’s May 10th meeting to send many to the exits.  The biggest losers were the emerging markets as investors feared that investors’ capital would leave these risky markets as interest rates rise. 

19 May 2006

Posted at 12:23h in The Friday Brief by
Last week we discussed the abundance of global economic growth and how, so far, it had not been accompanied by excessive inflation.  Even in the face of commodity prices rising straight up, record oil prices, rising wages, and tight supplies in almost all raw material category.  The pressure relief valve is productivity.  It has been rising steadily all over the world, keeping a lid on inflation.