Sonu Varghese
Here’s Why Markets Liked What the Fed Did and Hit a New Record High
Stocks reacted in a fairly neutral way after the Federal Reserve’s historically significant decision to jumpstart the rate cutting cycle with a 0.5%-point cut. But the real follow-through came on the day after the Fed meeting, perhaps after everyone slept on it. The S&P 500 surged 1.7% to close at a new record high on …
Sonu Varghese
September 20, 2024
The Fed’s Got the Back of the Labor Market
Say goodbye to those 5.5% rates! The Federal Reserve (Fed) jump-started their policy pivot by going big at their September meeting, cutting interest rates by 0.50%-points, taking the federal funds rate to the 4.75-5.50% range. This was not entirely unexpected. Traders put the probability of a 0.5%-point move at 63% just prior to the meeting, …
Sonu Varghese
September 19, 2024
The Potential Impact of a Big Rate Cut (It’s Not Scary!)
Last week I argued that the Federal Reserve (Fed) needs to “go big” sooner rather than later by starting their rate cut cycle in September with a 0.5%-point cut. Labor market risks are rising, and the August payroll data wasn’t really comforting from that standpoint. At the same time, the latest inflation data showed that …
Sonu Varghese
September 13, 2024
The Inflation Fight Is Over but Fed Policy Remains Uncertain
We’ve consistently said for several months now that inflation was last year’s problem. The latest consumer price index (CPI) data confirms this. Headline CPI is up 2.5% year over year (y/y) through August, which is the slowest pace in three and half years. Here’s some perspective on how far we’ve come: A year ago (August …
Sonu Varghese
September 12, 2024
Let’s Not Sugar Coat It – Risks Are Rising
The August payroll report was kind of ok on the face of it. Payrolls grew by 142,000 in August, below expectations for a 165,000 increase but these things are noisy. The unemployment rate also declined from 4.3% to 4.2%, which is welcome. However, read one step beyond headlines and it’s fairly clear the labor market …
Sonu Varghese
September 6, 2024
Why the Fed Needs to Go Big, Sooner Rather Than Later
The Federal Reserve (Fed) is poised to start the rate cut cycle in September. In his Jackson Hole speech, Fed Chair Powell explicitly said that the “time has come for policy to adjust.” In fact, minutes from the last Fed meeting in July indicated that some members thought the committee should have actually reduced rates …
Sonu Varghese
September 5, 2024
Promises vs Reality: Presidential Election Edition
With both the Republican and Democratic party conventions over, it’s safe to say we’re in the home stretch of the Presidential election. In fact, early voting starts in 7 days in North Carolina, a key swing state. That also means campaign rhetoric is heating up, and promises are being made—some wild ones, too, but this …
Sonu Varghese
August 30, 2024
What Tennis Can Teach Us About Investing and Making Your Edge Count
I just wrapped up four weeks of a sabbatical leave, which Carson allows after five years on the job. Strange as it may sound, taking four weeks off is not easy, but summer is usually a fairly quiet time (or so I thought). My family and I headed to Europe for a couple of weeks. …
Sonu Varghese
August 23, 2024
A Momentous Year, but 1968 Redux? Maybe Not
President Joe Biden withdrew from the 2024 presidential race and has endorsed Vice President Kamala Harris as the Democratic nominee, although the endorsement does not necessarily mean she will win the nomination. The change in the Democratic ticket does not change our fundamental view of the election, which we discussed at length in our recently …
Sonu Varghese
July 22, 2024
Three Big Things That Are Happening in the US Economy
The US economy mostly runs on the back of household consumption, and so the manufacturing sector is usually bit of an afterthought. Though its salience has increased recently amid the 2024 presidential election campaign, and especially former President’s Trump’s preference for a weaker dollar to boost the export sector. Still, the headline news from the …
Sonu Varghese
July 18, 2024