Current Commentary

Housing prices have soared in the past year. Given these gains, some are wondering whether housing is back in a 2000s-type bubble. But a deep dive into the data suggests...

Jobs are Booming. On Good Friday, the Bureau of Labor Statistics released the March 2021 employment data, and payrolls increased a staggering 916,000 for the month, easily beating the consensus expected 660,000.

The federal budget deficit hit an all-time record high of $3.1 trillion last year...Bargaining on tax hikes has already started in Washington, at least behind the scenes. It's going to be a long process, but we can say with high conviction that taxes are going up.

You’ve got to hand it to the Federal Reserve. With the cleverness of a seasoned head coach – think Jim Boeheim leading Syracuse in the NCAA basketball tournament – they figured out how to accomplish a great deal while making it look like they didn’t have many tools at their disposal.

Mark Twain once said, "History doesn't repeat, but it often rhymes." Either way, this Fed has made it clear that it will remain easy through 2022. As are result, we remain bullish on the economy and stocks, but cautious on bonds as inflation picks up. We all need to wait until 2023 to see what history we rhyme.

Unfortunately, the Fed does not seem to understand this and thinks it can fix any problem with more money...COVID shutdowns are the problem, and opening up is the solution. Distributing the vaccine as fast as possible is the best stimulus.

Wow! A Federal Reserve Chairman who casually dismisses the monetary lessons of Milton Friedman does so not only at his own peril but the country's.

We have argued that stimulus spending that offsets damage from shutdowns can be viewed as “just compensation” for a “taking.” But we are beyond that now. The pandemic is winding down, and economic activity is being boosted by both re-opening and stimulus. What is really happening today is that we are overstimulating the economy. And while this is great for earnings and equity markets in the near-term, it has long-term risks.

The bull market still has further to run, and we stand by our year-end projection for the S&P 500 of 4200. The Federal Reserve has the US economy awash in liquidity, with the M2 measure of the money supply up 25% from a year ago. Another very large fiscal “stimulus” package is wending its way through Congress, and is likely to hit the President’s desk relatively soon.

All this money printing threatens to eventually create a sugar high in equities. We aren't there yet, but markets are floating on a sea of new money. In fact, it's more like a tsunami! Inflation hedges (real estate, commodities, materials companies) will do well. Traditional fixed income (long-term bonds) is at risk. The return of inflation because of misguided policy choices is a very real threat to the long-term health of the US economy.