Credit is a Coward
Charles Dickens once wrote, "credit is a system whereby a person who can’t pay, gets another person who can’t pay, to guarantee that he can pay.” Now that’s a bit cynical, but it does tap into this idea that credit is based on the concept of trust. Can you...
Souring Outlook
OVERVIEW The U.S stock market deteriorated last week as all three major stock indices posted declines. The S&P 500 index fell 2.21%, the Dow Jones Industrial Average declined 1.28%, and the Nasdaq Composite plummeted 4.13%. Growth stocks led the decline,...
Home Prices vs. Rents
This week’s featured chart shows a reason why we probably won’t see inflation come crashing down any time soon. The chart, shown above, shows the ratio between home prices and rents. When it’s rising, it means home prices are growing faster than rents; when it...
Expectations vs. Reality
Volatility comes in many different forms. But in the stock market, there are two commonly looked at measures of volatility that investors focus on. The first has to do with the VIX index or the so-called “fear gauge” of the stock market. It’s a forward-looking...
A Low?
OVERVIEW The U.S. stock market bounced last week after three straight weeks of declines. The S&P rose 6.45%, the Dow gained 5.39%, and the Nasdaq surged 7.49%. As for foreign markets, developed country stocks rose 2.8%, and emerging markets gained 0.65%....
Can’t Afford It
It’s getting a lot harder for the average American family to afford a house these days. As shown on our featured chart above, the Housing Affordability Index (blue line, top clip) has fallen off a cliff. Compared to last year, the index has dropped 44 points...
The Spread Widens
This week, I want to focus on what is called a “credit spread” indicator. We highlighted the specific indicator above about a year ago. It measures high-yield (junk bond) credit spreads. In particular, it evaluates the distance between a safe asset—in this...
Misery Loves Company
OVERVIEW The U.S. stock market got crushed again last week as investors continued to digest higher-than-expected inflation data. The Dow Jones Industrial Average fell 4.79%, the S&P 500 slipped 5.79%, and the Nasdaq Composite dropped 4.78%. Volatility...
Great Expectations
This week's big news was the Fed’s announcement that it’s raising its benchmark interest rate by 75 basis points (0.75 percentage points). That was the Fed’s biggest interest-rate increase since 1994. This surprise move was in direct response to the red-hot CPI...
Measuring Inflation
Inflation—a general rise in the price of goods and services in an economy—can be problematic for the stock market for various reasons. Not only do input prices go up, which can crimp corporate profits, but consumers lose purchasing power if wages don’t also...
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