Sonu Varghese
Data Has Shown Most American Households Have Come Out Ahead of Inflation
Home prices and stock prices have risen to record levels, and as Ryan just wrote about, consumer balance sheets are in really good shape. Yet the title of this blog is likely quite controversial, especially since we just had the highest inflationary episode in over 40+ years and consumer sentiment suggests people aren’t happy about …
Sonu Varghese
May 29, 2024
Here’s Why We’re Still Pessimistic About China and Underweight Chinese Stocks
There’s been a lot of a chatter about China’s stock market recently, thanks to strong momentum. Chinese stocks (proxied by the iShares MSCI China ETF) are up over 18% over the past 5 weeks, versus a 5.5% return for the S&P 500. Of course, if you pull back the curtain to the last decade you …
Sonu Varghese
May 23, 2024
How We’re Positioning Portfolios in a High Interest Rate Environment
It’s been a cliché to say interest rates are going to be higher for longer, especially with markets pulling back expectations for rates cuts quite significantly over the last 4 months, thanks to hotter than expected inflation data. Our team had always been in the camp that we were unlikely to see more than 0.75%-points …
Sonu Varghese
May 17, 2024
This Is Why We’re (Still) Not Worried About an Inflation Resurgence
There’s no question that the inflation data in the first quarter was uncomfortably hot. But as we highlighted over the past several months, there were good reasons not to panic about another sustained upswing in inflation. I wrote about this when the January, February, and March consumer price index (CPI) reports were released. It was …
Sonu Varghese
May 16, 2024
Our Leading Economic Indicators Still Point to a Strong Economy
We recently got a couple of softer than expected economic report cards – Q1 GDP growth and the April payroll report – and suddenly we’re hearing more about an impending recession. In fact, the combination of these reports with hotter than expected inflation in Q1, has raised chatter about the dreaded “stagflation” scenario, i.e. low …
Sonu Varghese
May 10, 2024
The April Employment Report Tells Us the Economy Is Strong, But Not Red Hot
The April employment report was the first one in months that went well against market expectations. Three blockbuster payroll reports in Q1 had conditioned sentiment towards expecting more of the same, but instead we got something less blockbuster(y). Payrolls grew 175,000 in April — below expectations of 240,000 and lower than the red hot Q1 …
Sonu Varghese
May 3, 2024
Powell and the Fed Keep Their Eye on the Big Picture
The big picture, coming out of the Federal Open Market Committee (FOMC) meeting is that inflation has eased considerably since last year, but it remains elevated. As a result, they’re choosing to maintain policy rates where they are (in the 5.25-5.50% range). At the same time, Federal Reserve Chair Jerome Powell believes the disinflation process …
Sonu Varghese
May 2, 2024
Underlying Economic Growth Is Strong, and Here Are 5 Reasons Why
Headline GDP growth in the first quarter disappointed, but as I pointed out yesterday, underlying growth was actually quite strong. The good news is that the cyclical areas of the economy, namely housing activity and business investment, are seeing strong growth despite the hurdle of higher interest rates. That’s really icing on the cake. The …
Sonu Varghese
April 26, 2024
The Headline GDP Number Masks a Strong Economy
The economy grew 1.6% in the first quarter, after adjusting for inflation. This was well below expectations for a 2.5% increase, and significantly below the 3.4% increase we saw in the last quarter of 2024. It also ended a streak of growth above 2% for six consecutive quarters. So, what happened – is growth really …
Sonu Varghese
April 25, 2024
3 Big Themes, and What It Means for Investing
One of the central themes in our 2024 Outlook was higher productivity growth over the next several years. The key idea was that tight and mature labor markets enhance worker productivity and incentivize businesses to organize work more efficiently and invest in technological resources. That’s something that doesn’t happen when labor is cheap. With better …
Sonu Varghese
April 19, 2024