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What do the labor market and the stock market have in common? They are both showing a huge divergence between the fortune’s big companies and smaller companies. From 2009 to 2021, the large caps in the S&P 500 and the small caps in the Russell 2000 moved more-or-less in lock step. Since the end of 2021, however, investors in the S&P 500 have earned a 9% return....

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REPORT HIGHLIGHTS: The fourth bitcoin halving event, scheduled on or around April 19, 2024, heralds a significant transformation in the cryptocurrency landscape. This halving, marked by the reduction of bitcoin supply subsidy, the emergence of a liquid investment ecosystem via CME Group futures and options, the advent of spot Bitcoin ETFs and the introduction of...

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During the 1990s and again in the 2010s, equity and bond investors celebrated a goldilocks economy. GDP and employment growth were solid and core inflation remained comfortably around 2% per year despite increasingly tight labor markets. That scenario was occasionally interrupted, notably by the tech wreck recession in 2001, the 2008 global financial crisis, and...

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We entered 2023 with a pessimistic consensus outlook for U.S. economic performance and for how rapidly inflation might recede. As it happened, there was no recession, and personal consumption posted sustained strength. Inflation, except shelter, declined dramatically from its 2022 peak. The big economic driver in 2023 was job growth. Jobs had recovered all their...

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Looking back to 1928, when the time series for the S&P 500 began, U.S. equities have had an average annual price return of 5.9%. But gold isn’t far behind with an average yearly gain of 4.9%. It can be instructive to reprice equities in gold terms by dividing the S&P 500 index by the dollar price of gold. The S&P 500 to gold ratio has been through broad swings...

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Will the 2020s look like the 1970s with unstable inflation and soaring prices? Or will we return to the 2010s with low stable inflation rates of around 2%? There is a case to be made both ways. Those who worry about the possibility of durably higher inflation argue that the quarter century of low, stable inflation rates was a consequence of the end of the Cold...

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Over the past 18 months, U.S. mortgage rates have soared from 2.9% to 7.6%, their highest since 2001. Will this tremendous increase in mortgage rates cause the U.S. housing market to crash like it did in 2008? On one hand, higher mortgages have led to a steady decrease in the number of new mortgages being issued. In recent weeks, the number of new mortgages has...

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The U.S. interest rate debate changed dramatically in August 2023. The economic debate shifted gears with diminishing concerns about a recession, leading U.S. long-term Treasury yields to rise sharply. And the debate over future Federal Reserve policy transitioned from trying to call the peak in short-term rates to discussing the length of time rates might...

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Has anybody ever told you to be careful what you wish for because you might get it? Well, the Bank of Japan appears to be in one of those situations today. Japan spent three decades oscillating into and out of deflation. As such, when inflation started to rise in 2022, the BOJ was initially thrilled. Finally deflation was coming to an end, and inflation was...

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Despite the fastest rise in interest rates since 1981, and an inverted yield curve where short-term rates are much higher than long-term bond yields, the United States has not (at least yet) experienced the recession forecast by the vast majority of market pundits and economists. Why not? The relatively few contrarians that did not forecast a recession, including...

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European currencies have been rebounding strongly versus the U.S. dollar since hitting bottom in late September 2022 during the Gilt crisis when yields on U.K. government bonds surged. The rally in European currencies accelerated in July 2023 following the release of the U.S. inflation statistics (Figure 1). Figure 1: EUR and GBP have rebounded strongly in...

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At a glance: Higher tech stocks tend to boost ETHBTC, while a higher USD tends to depress it Bitcoin supply is perfectly inelastic, which contributes to its high volatility Together, ether and bitcoin account for over 60% of the total value of the world’s cryptocurrencies, but the exchange rate between the two has varied widely over time. So, what drives...