Article Category: Interest Rates

Interest rates have been the primary focus of investors lately, and for good reason. A glance at the chart of the 10-year Treasury note yield below shows that while rates have been steadily declining for nearly a year, that move accelerated sharply during the last two weeks.

Mr. Powell and the Fed continue to claim that their actions are data-dependent, but the question is beginning to arise: What data are they dependent on? The fact that many Fed officials have referred to this as an “insurance cut,” almost by definition suggests that fundamental economic data doesn’t justify a move lower.

Jerome Powell’s testimony last week offered no pushback against rate-cut expectations, and if anything, actually stoked the fire. Bets of a 50 basis point cut, as opposed to 25, rose, indicating the market shifted to an even more dovish stance.

As you most likely know, last Friday’s strong jobs report – which showed 224,000 jobs created in June – has caused a bit of unease across the market. With investors now salivating over the prospect of a rate cut, robust economic data has come to be viewed with disdain. After all, who wants a strong economy when we can have asset-price juicing stimulus instead?

It’s hard to believe, but our current economic expansion is nearly 10 years old, and will soon become the longest economic expansion on record. However, it has also been the weakest of the 11 expansions that have taken place since 1949. Is this a coincidence?