Sonu Varghese
The Labor Market Refuses to Buckle and Shows Underlying Strength
Another month, another strong payroll report. The economy created 236,000 jobs in March, topping expectations for a 12th straight month. A record streak that is more than double the previous longest streak (before the current expansion). That in and of itself tells you how strong and underestimated this labor market is. Prior to the report’s …
Sonu Varghese
April 12, 2023
3 Reasons the Dollar Isn’t Going Away Anytime Soon
There’s always been talk about the U.S. dollar (USD) losing its dominant currency status globally, but lately, the chatter seems to have increased, especially since Russia’s invasion of Ukraine, which saw the US impose severe and expansive sanctions on Russia and Russian officials – enabled by the fact that the US treasury has jurisdiction over …
Sonu Varghese
April 4, 2023
Chipping In: The Future of US Manufacturing 🪨
Here’s something really positive about the US economy It’s hard to get away from the negative headlines that have accompanied the Silicon Valley Bank crisis. Recession calls have seen a renewed uptick since the crisis unfolded, whereas they were dying down prior to that, thanks to positive economic data in February and early March. Note …
Sonu Varghese
March 30, 2023
Gold: The Shiny Rock is Shining
Most risky assets have had a volatile stretch since the Silicon Valley Bank crisis began. The S&P 500 Index has recovered but is still down about 0.5% between March 8th (the day prior to the crisis unfolding) and March 28th. In a welcome change from last year, bonds have zigged while stocks zagged, with the …
Sonu Varghese
March 29, 2023
The Fed Expects Banking Stress to Substitute for Rate Hikes
The Federal Reserve raised the federal funds rate by 0.25% at their March meeting, bringing it to the 4.75-5.0% range. This is the ninth-straight rate increase and brings rates to their highest level since 2007. However, the most aggressive tightening cycle since the early 1980s, which saw them lift rates all the way from near …
Sonu Varghese
March 23, 2023
Where Goes the Fed From Here: Inflation vs. Financial Stability?
The Federal Reserve has two mandates – “pursuing the economic goals of maximum employment and price stability.” Over the past year, the Fed has been leaning on the side of the price stability mandate, arguing that the labor market is too tight, i.e., beyond maximum employment. Fed Chair Jerome Powell’s mantra has been: “We must …
Sonu Varghese
March 14, 2023
Payrolls Strong but Unemployment Rises: All Mixed Up
Another month, another solid employment report. Employment rose by 311,000 in February, on the back of 504,000 in January and 239,000 in December. It’s certainly been a warm winter. This is the labor market that refuses to give in, despite the Fed throwing almost 500 bps (5%-points) of rate hikes at it and gearing up …
Sonu Varghese
March 10, 2023
Panic! At the Fed?
Federal Reserve Chair Jerome Powell’s comments this week during his semi-annual testimony in front of Congress did not inspire much confidence with respect to the path for monetary policy. It seems like Fed officials’ are confused as to what they want to do next. Case in point: last month, Powell said that the “disinflationary process …
Sonu Varghese
March 9, 2023
Why the Dollar Matters For International Equity Investors
Last year the MSCI EAFE Index, which represents a basket of developed market stocks, fell 14.5%. Meanwhile, the MSCI Emerging Markets (EM) Index lost 20.1%. It turns out the returns for these baskets were higher in local currency terms, and there was a big drag from a stronger dollar. In local currency terms, the MSCI …
Sonu Varghese
March 7, 2023
Why Invest in Stocks When Bond Yields are High?
TINA, or “There is No Alternative,” was the theme of the last decade as interest rates were close to zero. Yields on long-term bonds weren’t much above that. So, stocks were the “only alternative” if someone wanted reasonable returns. But now it looks like there is an alternative, thanks to the Federal Reserve’s aggressive rate …
Sonu Varghese
March 3, 2023