What we’re reading (3/29)
“8/9. That's The Fed’s Record On Triggering A Recession While Trying To Fix Inflation.” (Politico). “Nine times since 1961, the central bank has embarked on a series of interest rate increases to rein in inflation. Eight times a recession followed. The only true ‘soft landing’ — as significant rate hikes with no subsequent slumps are called — occurred in 1994, according to a March 25 report by investment bank Piper Sandler. Not a sterling track record.”
“Home-Price Growth Accelerated In January” (Wall Street Journal). “The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 19.2% in the year that ended in January, compared with an 18.9% annual gain the prior month.”
“Tesla, Amazon Stock Splits Trigger Retail Stampede” (Bloomberg). “Tesla surged 8% Monday, adding about $84 billion to the company’s market value, after saying it’s planning a second stock split in less than two years. Amazon jumped more than 5% the day after announcing a 20-for-1 split this month and the stock has been on a tear ever since. In theory, this shouldn’t happen. A split doesn’t affect a company’s business fundamentals, and investors averse to a stock’s high price tag can simply buy fractional shares instead. Yet splits are causing day traders to pile in, fueling rallies in these companies’ shares.”
“I Keep Hoping Larry Summers Is Wrong. What If He’s Not?” (New York Times). “I’m probably as apprehensive about the prospects for a soft landing of the U.S. economy as I have been any time in the last year. Probably actually a bit more apprehensive. In a way, the situation continues to resemble the 1970s […]. In the late ‘60s and in the early ‘70s, we made mistakes of excessive demand expansion that created an inflationary environment. And then we caught really terrible luck with bad supply shocks from OPEC, bad supply shocks from elsewhere. And it all added up to a macroeconomic mess. And in many ways, that’s the right analogy for now.”
“Weekly Market Pulse: The Cure For High Prices” (Alhambra Investments). “The economy right this minute is not in danger of recession, at least based on the indicators we follow. We have seen some early warnings such as the inversion of the 10/7-year Treasury yields but that is generally a very early warning of recession. Of course, at the rate prices and interest rates are rising recently, that may not prove true this time but we would still expect to see other indicators turn negative prior to the onset of recession. Other parts of the curve would still invert and credit spreads would still widen. And right before recession, the yield curve would probably steepen as short-term rates fall rapidly; the market will not wait for the Fed to start lowering rates before rendering its own verdict on the economy.”
