Category Archives: Current Events

Valuations Are High – So What?

Posted on June 26, 2018 by Gemmer Asset

For years market prognosticators have been saying that valuations are high.  And if you look at the data, it’s true.  The Cyclically Adjusted PE or CAPE Ratio (see definition here), a measure of valuation that is generally thought to be more stable than other relative valuation measures, has been above its historical average since August of 2009 (S&P 500).     Here is the same chart with two additional horizontal lines showing +/- two standard deviation bands…
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Market Recap

Posted on June 22, 2018 by Gemmer Asset

  A New Recession Call   With President Trump’s new trade agenda and fears about Fed policy inverting the yield curve, the drumbeat of recession calls is picking up.   This week David Rosenberg of Gluskin Sheff & Associates garnered a lot of attention by calling for a recession in 12 months (read more here).   Rosenberg has been unfairly tarred as a perma-bear over the years. He was certainly bearish in the late 90’s…
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Corporate Earnings – The Future Looks Good

Posted on June 21, 2018 by Gemmer Asset

“Prediction is very difficult, especially if it’s about the future.” – Nils Bohr, Nobel laureate in Physics   I don’t think Bohr was referencing corporate earnings estimates when he made the above quip, but his words do make a point about predicting the future…   When discussing the state of the U.S. economy, one of the things analysts often point to is the health of corporate earnings – not just reported earnings, but future earnings….
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End of an Era

Posted on June 20, 2018 by Gemmer Asset

Nothing lasts forever.  Tuesday afternoon we learned that General Electric, an original member of the Dow Jones Industrial Average, will be kicked out effective June 26th.   It will be replaced by Walgreens Boots Alliance.   Wow!!   GE was an original member of the Dow in 1896 and has been in it continuously since 1907.  The company has been struggling the last few years, it replaced its CEO recently, and slashed thousands of jobs while cutting the…
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Market Update

Posted on June 15, 2018 by Gemmer Asset

  It was obviously a busy news week.  The Trump/Kim meeting garnered a lot of attention early on, and then of course there is the World Cup.  But market wise, there were four key items:   Inflation report   The Fed meeting   European Central Bank (ECB) meeting   Trade Policy   Inflation – Drifting Higher   There was another sign that inflation is percolating this week.  The CPI report for May showed that inflation…
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Trade with Canada – Surplus or Deficit?

Posted on June 14, 2018 by Gemmer Asset

Canada has been in the press a lot recently.  The reason for all the attention is the country’s trading relationship with the United States.  In a recent tweet, the President claimed: “…they (Canada) make almost 100 Billion Dollars in Trade with U.S. (guess they were bragging and got caught!). Minimum is 17B.” If you listen to other economists, the U.S. runs a trade surplus, not a deficit with Canada (meaning Canada imports more goods and…
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A Hawkish Hike

Posted on June 13, 2018 by Gemmer Asset

It’s not exactly a shocker the Fed hiked interest rates by another 25bps today. But going into to today’s meeting the market had started to think the Fed might ease up on future rate hikes. After all:   1) Emerging markets were starting to show some stress.   a.  Take Brazil   b.  Or Argentina   c.  Both the Indian and Indonesian’s central bank heads took the Fed to task about tightening.   2) Recent speeches…
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What Does the Yield Curve Tell Us?

Posted on June 7, 2018 by Gemmer Asset

What Does the Yield Curve Tell Us?   If you have had the unfortunate pleasure of reading the financial press over the last few months you have invariably run into articles talking about the shape of the yield curve and the bad things it portends.  A ten second internet search gives the following headline from the Wall Street Journal (see box to the right).  If you peruse the darker underbelly of online financial news you…
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Labor Market: Haven’t Seen This Before

Posted on June 6, 2018 by Gemmer Asset

The labor market set something of a record this week. For the first time since records have been kept (OK, the data only goes back to 2000, but cut us some slack here!), job openings in the U.S. exceed the number of unemployed workers. Bloomberg has a quick summary here.     This report coming on the heels of last Friday’s payrolls reports basically guarantees the Fed hikes next Wednesday by another quarter point. This…
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Forecasts for Q2 GDP: Its all about the inputs…

Posted on June 4, 2018 by Gemmer Asset

The Atlanta Fed, who maintains a model that attempts to estimate future US GDP data releases came out with their latest Q2 forecast:     This estimate is definitely an outlier.  Consensus among top economists is that growth will come in around 3.2% (blue line above).  And the New York Fed’s own model is predicting a 3.3% print.  If the Atlanta Fed’s 4.8% number holds however, it would be the best real quarterly growth since…
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