Tag: federal reserve

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Fed Enacts Emergency Rate Cut. New Record Lows on Treasuries

This morning at about 9 AM central, in response to the Coronavirus, the Federal Reserve announced an emergency 0.50% rate cut.

The initial response by the market was to send stocks and gold soaring. As the day wore on U.S. stocks crumbled losing about 3.5% at one point and ending the day down 2.8% while gold hung on for a 3%+ gain.

The 10-year Treasury yield continued to slide throughout the day (sending bond prices up) and even got below 1% for the first time ever! Think about that…in the almost-250 years of this great Republic we’ve just set a record low on bond yields. Continue reading “Fed Enacts Emergency Rate Cut. New Record Lows on Treasuries”

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The Fed Cuts Rates for a Third Time…And Zombies

Yesterday, the Federal Reserve confirmed the market’s expectations and announced they would be cutting rates for a third time this year. The rate cut is an addition to the recently-announced program of supplying $120 BILLION in liquidity each night AND announcing the resumption of QE whereby they’ll be buying $60 BILLION of short-term Treasurys each month.

In other words, the Fed is pursuing policy that, until the recent Great Financial Crisis, was unprecedented. Why? Why are they pursuing emergency policy actions when the economy is supposedly strong, stock market is near all-time highs, unemployment near all-time lows and inflation supposedly around 2%? Continue reading “The Fed Cuts Rates for a Third Time…And Zombies”

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Painkillers Are Not Cures

Last week the Federal Reserve announced it would cut interest rates by 0.25%. This is major news because it signals the end of the “tightening” cycle and is the first rate cut since the Great Recession fallout. I wrote about the stock market’s action during rate cutting cycles a few weeks back here.

Here’s another great chart showing market performance during the last two rate cutting cycles.

Continue reading “Painkillers Are Not Cures”

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Fed Rate Cuts and the Market’s Response. A Historical Perspective…

I was asked a great question by a client this morning. “With all this news of rate cuts from the Fed, how does this impact my portfolio?”

The market has broadly rallied on expectations that the Federal Reserve would begin lowering interest rates again…likely even at its next meeting (July 30-31). This is an action the Fed hasn’t taken since the Great Financial Crisis of 2007 – 2009.

But how has the market actually performed, historically, once the Fed has begun easing after a period of tightening? It’s not necessarily bullish at all: Continue reading “Fed Rate Cuts and the Market’s Response. A Historical Perspective…”

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Every Time This Has Happened Over the Last 50 Years A Recession Followed

Danielle DiMartino Booth, a former Federal Reserve insider, recently wrote a great article for Bloomberg. In it she provides a couple informative stats involving the relationship between unemployment rate changes and recessions.

First, she points out, “According to historic payroll data and the National Bureau of Economic Research, every time the three-month average unemployment rate exceeded its six-month average at cycle peaks over the past 50 years — like it did in January — the U.S. economy has experienced a recession.” Continue reading “Every Time This Has Happened Over the Last 50 Years A Recession Followed”