Credit

Is Japan's Carry-Trade Earthquake Over Yet?

Aug 5, 2024 3 min read

This morning, US stocks and bonds were quick to price in Japan's stock market carnage overnight. Tokyo's Nikkei stock price index fell more than 12%, its worst day since "Black Monday" in October 1987, as the yen surged to 142 against the dollar (chart). This time, the crash was in carry trades financed in Japan. In 1987, it was so-called portfolio insurance in the

Ed Yardeni
Eric Wallerstein

Giving Credit To The Consumer

Jul 8, 2024 2 min read paid

The strength of the US consumer has underpinned much of the current bull market in stocks. In recent months, rising real disposable income (DPI) has fueled consumer spending even as the excess saving accumulated during the pandemic was depleted. Debt service payments have remained below 10% of nominal DPI from Q1-2020 through Q4- 2023. That's relatively low because many households cleaned up their balance sheets following the Great

Ed Yardeni
Eric Wallerstein

SLOOS Shows Looser Credit Conditions

Nov 6, 2023 1 min read

The Fed may not be as almighty as Fed officials believe. The FOMC has raised the federal funds rate aggressively by 525bps since March 2022. Their goal was to slow economic growth to subdue inflation. Yet the economy grew rapidly during Q3 and the unemployment rate has remained below 4.0% since February 2022. Nevertheless, inflation has moderated significantly since last summer (chart). Inflation seems to be to be mostly

Ed Yardeni

Banking Crisis May Be Abating

Apr 15, 2023 2 min read paid

We've previously observed that any day without a banking crisis is a good day for stocks. SVB imploded on Friday, March 10. On Sunday, March 12, the Fed and FDIC took actions to avoid additional bank runs. The S&P 500 is up 7.1% since March 10 led by Information Technology (9.8%), Health Care (8.6), and Utilities (7.6%) (chart). All of the sectors

Ed Yardeni

On the Lookout for a Bank Credit Crunch

Apr 9, 2023 3 min read

The Silicon Valley Bank imploded on Friday, March 10. To avert a widespread bank run, the Fed announced, on Sunday, March 12, that liquidity would be provided by the Bank Term Funding Program (BTFP). The Fed's press release stated that this new liquidity facility will offer loans of up to one year in length to financial intermediaries pledging US Treasuries, agency debt and mortgage-backed securities, and other qualifying

Ed Yardeni

Fed Backstops the Banks

Mar 31, 2023 2 min read

The Fed has the banks' backsides covered. The Fed can't insure deposits, but it can guarantee that the banks have access to plenty of liquidity to meet deposit outflows without having to sell securities from their bond portfolios at a loss as happened to Silicon Valley Bank (SVB), forcing it into receivership on March 10. The banks are required to put up bonds as collateral for their

Ed Yardeni

April Is Coming

Mar 30, 2023 2 min read paid

April is the second best month of the year for the stock market. From 1928 through 2022, the S&P 500 was up 1.4% on average during the month, second only to July's 1.7% average gain (chart). The S&P 500 is up 1.5% since the end of February through today (chart). That's impressive given that Silicon Valley Bank imploded on

Ed Yardeni

A Wave of Bank Mergers Ahead

Mar 27, 2023 2 min read paid

The FDIC started to do its job immediately after it seized Silicon Valley Bank (SVB). The regulator transferred all SVB deposits and assets into a new “bridge bank” to protect depositors of the failed lender. On Monday morning, March 27, the FDIC announced that First Citizens BancShares will buy SVB’s deposits and loans, just over two weeks after the biggest US banking collapse since the global financial crisis. The

Ed Yardeni

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