Insight & Commentaries
Before we can hope to see a turn for the better, we must first see signs of stabilizing. For the most part, this is what we see in the most recent data. We try to discern the path to recovery in the week-to-week data: virus trends, by looking at cases and deaths across the United States; economic trends, by looking at mobility and reports of real economic activity; and market trends, by looking at the response of key financial indicators. This week’s analysis showed us that the economic hole is deep, but the rate of falloff is slowing. Slowing Spread…
Stocks rallied last week on talk of reopening the economy and the S&P 500 is about half way back to February highs. The lockdown is helping to slow cases of coronavirus, but the economy is taking a beating as a result. Judging by recent data, the U.S. economy is likely contracting at an annualized pace in the range of -15% to -22% (chart, below). Over 10 million Americans filed for unemployment insurance in the past month. Estimates of potential job losses range from 23 million (Goldman Sachs) to 47 million (St. Louis Federal Reserve). The speed of the present downturn…
An eruption of volatility hit markets last week as the World Health Organization declared Covid-19 a pandemic. This extraordinary outbreak will throw out of kilter many aspects of daily lives. Markets are rapidly reestimating risk and trying to predict the size and duration of the shock to the global economy. Central banks and governments are also stepping up response to unfolding conditions. Yesterday, the Federal Reserve cut their benchmark interest rate by 100 basis points (-1.0%) to a range of 0-0.25%, committed to buying $500 billion of U.S. Treasuries and $200 billion of mortgage-backed securities, and took other measures to…
Bond prices continue to surge, driven by coronavirus fears and a new oil price war. Prices of long-term U.S. Treasury bonds are rising rapidly, sending bond yields to record lows. Bonds at the longest end of the U.S. Treasury curve are approaching gains of 20-30% year-to-date. Similar bond price action occurred in the past, but never before have U.S. interest rates reached levels seen today. U.S. 20-year Treasury yields have now fallen through one percent, following the 10-year Treasury amid a broader global pattern of rapidly declining and ultra-low rates. The 30-year U.S. Treasury bond yield currently stands at a…
The spread of coronavirus outside China hit markets hard last week. Stocks fell on reports of new infections and deaths in Italy and elsewhere. The sharp drop in stock prices, coupled with a plunge in Treasury bond yields, leaves the S&P 500 dividend yield now higher than the 30 year U.S. Treasury yield (first chart, below). Domestic stocks suffered more significant declines than foreign due to concern the virus could spread in the United States (second chart, below). The chart shows pronounced weakness in the S&P 500 (a measure of domestic stock performance) versus the MSCI EAFE index (a measure…
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Dividend Investing
The Case for Rising Dividends
A strong case can be made for dividend growth investing. The Case for Rising Dividends explores the rationale and evidence behind the dividend growth philosophy.
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