Article Category: Inflation

Profits, Breadth, Confidence, LEI’s and Inflation

We have a number of topics to cover today so we're going to move quickly and hop around a bit. The first item on our agenda is profits.

As of last Friday, just over half of the S&P 500 ( had reported earnings. Nearly 80% of those companies have posted positive earnings surprises, which leaves the blended earnings growth for the S&P 500 at 23.2%. If this is the final figure when all is said and done, it would represent the strongest earnings growth since Q3 2010.

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Posted in: Earnings Federal Reserve Inflation Interest Rates Market Breadth

What if the World Stopped Growing?

Your mission, should you choose to accept it, is to predict the future. As always, should you or any member of your team be caught or killed, the Secretary will disavow any knowledge of your actions. This message will self-destruct in five seconds ...

Actually, you don't get to choose whether or not to accept this mission. You're an investor. And an investor's job is - quite simply - to predict the future.

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Posted in: Dividends Economy Federal Reserve Inflation Interest Rates Volatility

What Happens When the Fed Closes the Term Spread?

If you were to compile a list of the most effective recession predictors, the term spread, or difference between short and long-term interest rates, would likely be at the top of that list.

This is because the term spread (also known as the slope of the yield curve) has an uncanny ability to predict economic slowdowns. Over the past 60 years, every recession we've experienced has been preceded by an inverted yield curve. Not only that, a negative term spread has ALWAYS been followed by an economic slowdown - even if it did not result in an official recession.

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Posted in: Bonds Economy Federal Reserve Inflation Interest Rates

Ramblings and Musings

As Dow Theory Letters has evolved over the last couple of years, we've transitioned toward more subject-focused articles, rather than the "stream of consciousness" style writing that Richard often preferred (older subscribers may recall that our articles never even used to have titles!).

With multiple writers on board, this approach makes sense, but sometimes I miss the ability to muse and ramble about disparate topics, so I'm going to do that today.

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Posted in: Dow Theory Economy Federal Reserve Inflation Interest Rates

LEIs and Price Action Agree

Last month's meltdown in the stock market began in earnest on February 2nd, the day that the January jobs report was released. The culprit, at least for the initial bout of selling, was an acceleration in wage growth - the initial estimate of average hourly earnings reached 2.9%, the strongest year-over-year gain since 2009.

This report, which came on the heels of two months of rising long-term interest rates (the 10-year climbed from around 2.36% to 2.85%) caused the market to panic. Investors immediately began to worry about rising inflation, which would then trigger a more hawkish Fed, and consequently more downward pressure on the economy than previously anticipated.

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Posted in: Corrections Federal Reserve Inflation Market Breadth Volatility

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