Deep Dive

DEEP DIVE: US Economy Is Less Interest Rate Sensitive

May 31, 2024 6 min read paid

US Economy I. Banks Versus Nonbanks. The resilience of the US economy has been impressive over the past two years in the face of the Fed’s dramatic tightening of monetary policy. Nevertheless, there are still a few hardcore hard-landers predicting that the economy either is already in a recession or soon will be. They’re convinced that there are long and variable lags between restrictive monetary policy and its

Ed Yardeni
Eric Wallerstein

DEEP DIVE: Dow 40,000 And Counting

May 24, 2024 4 min read paid

The Baby Boomers have been heavily influenced by a couple of Spocks—Dr. Benjamin Spock and Spock of Star Trek, played by Leonard Nimoy. Dr. Spock was a pediatrician who wrote Baby and Child Care (1946). It became the unofficial bible of child rearing as millions of mothers read it and raised their Baby Boom children according to the book’s advice. In the 1960s and 1970s, conservatives blamed Dr.

Ed Yardeni
Eric Wallerstein

DEEP DIVE: Consumers Running Out of Excess Saving. Will They Drop Or Continue To Shop?

May 17, 2024 4 min read paid

Bears have been growling since mid-2022 that the US consumer will soon be “tapped out” of the excess savings accumulated during the Covid-19 fiscal stimulus spree from 2020 to 2021, forcing them to rein in spending. Consumers also may soon have maxed out their credit cards, according to this gloomy narrative. Consider the following: (1/4) Sure enough, two San Francisco Fed economists in a May 3 post observed that

Ed Yardeni
Eric Wallerstein

DEEP DIVE: The Causes of Recessions & Bear Markets, a Recap

May 11, 2024 4 min read paid

There are three ways that recessions typically are triggered: 1) a monetary-tightening-induced financial crisis turns into a credit crunch; 2) a geopolitical crisis causes oil prices to soar; or 3) speculative asset bubbles burst. All three have caused recessions in the past. Consider the following relevant points: (1/6) The most common reason recessions have occurred in the past is the tightening of monetary policy, usually as the Fed became

Ed Yardeni
Eric Wallerstein

DEEP DIVE: AI Chips & The Others

May 7, 2024 5 min read paid

A handful of semiconductors companies reported earnings and made it clear that the rabid demand for chips used to run artificial intelligence (AI) does not carry over to demand for chips in other segments of the market. Skyworks Solutions highlighted the weakness in chips for mobile phones. NXP Semiconductors laid out the inventory destocking that has plagued the auto industry. And while Advanced Micro Devices’ (AMD) AI chips had a

Ed Yardeni

DEEP DIVE: Inflation: The Good, The Bad & The Ugly

Apr 20, 2024 7 min read paid

Inflation I: The Good Obviously, the outlook for inflation matters greatly to determining Fed policymaking and the course of the economy. Let’s have a closer look at the latest inflation data to identify the good, the bad, and the ugly: (1) CPI excluding shelter. Debbie and I are encouraged to see that the headline and core CPI inflation rates excluding shelter were only 2.3% y/y (versus 3.

Ed Yardeni

DEEP DIVE: The Amazing Flying Machine

Apr 6, 2024 6 min read paid

GDP I: Still Flying. Not Landing. It’s official: There was no recession in 2022 or 2023. There was no hard landing in either year. There was a soft landing of sorts in 2022, but the economy was flying high last year and remains on that flight path in 2024. Consumers continued to increase their spending through the end of last year, upending forecasts (not ours) that the dwindling of

Ed Yardeni

DEEP DIVE: The Fed Put Is Back

Mar 30, 2024 6 min read paid

Monetary Policy I: Post-Modern Monetary Theory Melissa and I received quite a few favorable reader comments on last Monday’s Morning Briefing discussing our “Post-Modern Monetary Theory” (P-MMT). Many of the comments included thought-provoking queries about our P-MMT, which I address below. In addition, the Financial Times is running my summary of our theory in an op-ed titled “The Fed should resist messing with success.” The basic concept of P-MMT

Ed Yardeni

DEEP DIVE: The Fed In A Presidential Election Year

Mar 23, 2024 3 min read paid

Notwithstanding last week’s hotter-than-expected CPI and PPI reports, the financial markets are still anticipating that the Federal Reserve will cut the federal funds rate three times over the next 12 months. On Friday, the nearby federal funds rate futures was 5.33%, while the 12-month futures was 4.47% (Fig. 1 below). That 86-basis-point spread implies that investors expect at least three cuts of 25 basis points each by

Ed Yardeni

DEEP DIVE: 'Pent-Up Exuberance'

Mar 15, 2024 4 min read paid

Raphael Bostic is the president and CEO of the Federal Reserve Bank of Atlanta. He is a 2024 voting member of the Federal Open Market Committee. In a March 4 post on his bank’s website, he warned about “pent-up exuberance.” He acknowledged that inflation has slowed, but he fears that it could accelerate quickly if the Fed stops tapping on the economy’s brakes and begins to step on

Ed Yardeni

DEEP DIVE: Global Economy Muddling Along To New Record-High Stock Prices

Mar 10, 2024 4 min read paid

The UK and Japan are in recessions. Germany is on the edge of falling into a recession. China’s property bubble has burst, which is depressing the overall economy and weighing on other Asian economies. The weakness in the global economy is evident in commodity prices. The S&P Goldman Sachs Commodity Price index is down 31% from its March 8, 2022 peak (Fig. 1 below). The CRB raw

Ed Yardeni

DEEP DIVE: The Roaring 1990s vs The Roaring 2020s

Mar 1, 2024 8 min read paid

Since the start of the 2020s, we’ve been comparing the current decade mostly to the 1920s and the 1970s. However, the S&P 500’s 42.3% meltup since October 12, 2022 to a new record high on February 23 has us considering whether another period represents a possible analogous scenario, i.e., the second half of the 1990s. We see parallels between conditions then and now that

Ed Yardeni

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