Research & News
Asset Allocation Weekly (April 18, 2019)
by Asset Allocation Committee Why is inflation so low? The persistence of low inflation, despite the long expansion and the decline in unemployment, continues to befuddle policymakers. Standard economic theory suggests there is an inverse relationship between inflation and unemployment. When the unemployment rate is low, firms should be experiencing reduced excess capacity. As capacity is… Read More »
Asset Allocation Quarterly (Second Quarter 2019)
The Federal Reserve shifted fully from its hawkish stance at the beginning of the year. We anticipate that the committee will maintain its newly dovish stance with the potential for further monetary accommodation. Though the employment/population ratio has improved, we find it still indicates slack in the labor force, blunting the full impact of wage… Read More »
Weekly Geopolitical Report – Reflections on Domestic Policy and American Hegemony: Part I (April 15, 2019)
by Bill O’Grady (Due to the Easter holiday, our next report will be published April 29.) The dollar is the world’s reserve currency. As such, there is a constant demand for dollars from foreign countries to provide liquidity for global transactions. Because of the reserve currency status, U.S. monetary and fiscal policy affects the world economy… Read More »
Asset Allocation Weekly (April 12, 2019)
by Asset Allocation Committee The employment data is closely watched by financial markets; although the data isn’t necessarily a leading indicator for the economy, it is probably the most important from a political and social perspective. Weak employment data is a worry for political incumbents and concerning to policymakers. However, beyond the headline data, there are… Read More »
Weekly Geopolitical Report – When Hegemons Fade (April 8, 2019)
by Bill O’Grady In our Daily Comment report, a section on Brexit has become something of a regular feature. As part of keeping up with developments, we have commented on nearly every twist and turn (or lack thereof) in the Brexit process. In a recent WGR series, we discussed the Irish problem[1] and how it relates… Read More »
Asset Allocation Weekly (April 5, 2019)
by Asset Allocation Committee Mortgage-backed securities have rather odd characteristics compared to Treasuries. At their most basic level, mortgages are bonds—prices are inversely related to yields. The pricing on mortgages assumes a certain level of refinancing activity. However, when yields rise, expected mortgage duration tends to extend because mortgage holders are less likely to refinance. When… Read More »
Weekly Geopolitical Report – Modern Monetary Theory: Part IV (April 1, 2019)
by Bill O’Grady In Part III, we examined the role of economic paradigms in the equality/ efficiency cycle. This week, we conclude this four-part series with a discussion on the flaws of Modern Monetary Theory (MMT) and market ramifications. The Flaws of MMT All of the major economic paradigms previously discussed lead to eventual problems. Capital-friendly… Read More »
Asset Allocation Weekly (March 29, 2019)
by Asset Allocation Committee Long-dated Treasury bonds have enjoyed a strong rally in recent weeks. Fears about future U.S. economic growth, falling global economic growth and a reversal in monetary policy expectations have all conspired to lower yields. The question now is whether or not yields have fallen more than is justified by the fundamental factors.… Read More »
Weekly Geopolitical Report – Modern Monetary Theory: Part III (March 25, 2019)
by Bill O’Grady In Part II, we discussed the principles and consequences of Modern Monetary Theory (MMT). This week’s installment will be devoted to the importance of paradigms. Next week, we will conclude the series with a discussion on the potential flaws of MMT along with market ramifications. The Importance of Paradigms Every major shift in… Read More »
Asset Allocation Weekly (March 22, 2019)
by Asset Allocation Committee One factor we have been tracking is the recent behavior of retail money market funds. We have noted that households began building money market funds about the time that the equity market peaked and U.S. trade policy began to turn toward protectionism. In the coming months, money market funds continued to rise… Read More »