Tag: President Donald Trump

Don't Let The Headlines Fool You

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Back in 1925 President Calvin Coolidge famously said, “The business of America is business.” Apparently, this is still true even if the current administration more closely resembles the Five Families rather than the worthy successors to Silent Cal.

Even as President Trump’s new communications director is “front-stabbing” his White House colleagues and Republicans in Congress can’t get anything done about health insurance reform except make themselves look foolish – and without any help from the Democrats – the economy seems to roll on regardless. Last week the Commerce Department reported that the American economy grew at an annual rate of 2.6% in the second quarter, the first full quarter of Donald Trump’s presidency. That was up sharply from the first quarter’s downwardly revised 1.2% rate and the second strongest rate in the past eight quarters.

That managed to happen thanks to some extent from the hope and anticipation of major health insurance and tax reform, not their actual enactment. Imagine what might happen if our lawmakers actually do what they’re supposed to be doing and those things become reality?

A more pertinent question for this column is: Is that growth rate strong enough to get the Federal Reserve back to raising interest rates again and start its “balance sheet normalization program,” i.e., trimming its $4.5 trillion securities portfolio? Continue reading "Don't Let The Headlines Fool You" →

Has Yellen Become A Dove Again?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Janet Yellen’s equivocal remarks at last week’s semi-annual Congressional testimony certainly might make you believe that a rate hike at the Federal Reserve’s July 25-26 meeting is hardly a sure thing. Indeed, the odds of that happening are a lot less than 50-50. A lot less.

In her testimony, Yellen remained confident in her previous declarations that inflation would gradually rise to the Fed’s 2% target. “It’s premature to reach the judgment that we’re not on the path to 2% inflation over the next couple of years,” she said. But then she quickly hedged her bets. “We’re watching this very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent,” she said.

Based on the past several months’ worth of inflation statistics, one would have a tough time arguing that lower-than-expected inflation hasn’t become “persistent.” Last month’s consumer price index was unchanged from May and up only 1.6% versus a year earlier, the fourth straight decline by that measurement. That followed May’s personal-consumption expenditures index, the Fed’s preferred inflation measure, which fell 0.1%. The core index, which excludes food and energy, rose 0.1%, but just 1.4% on a year-to-year basis, well below the Fed’s target rate and lower than at the beginning of the year. Continue reading "Has Yellen Become A Dove Again?" →

IBB - Biotech Catches Fire... Finally

Posted on by Noah Kiedrowski

Noah Kiedrowski - INO.com Contributor - Biotech


Introduction

Biotechnology has been a difficult space to deploy capital over the previous ~18-24 months. This cohort plummeted over and over again from both sides of the political isle as the 2016 presidential race unfolded. Between Hillary Clinton, Bernie Sanders and Donald Trump taking aim at drug pricing via speeches, Twitter, and other social media platforms, largely attributed to the entire cohort selling off. The sustained sell-off lead to the entire cohort to sell off from all-time highs of $400 to $240 or 40% in only six months as measured via the iShares Biotechnology Index ETF (NASDAQ:IBB). From February of 2016 through June of 2017 IBB traded in a tight range from $250 to $300 while Donald Trump continually fired shots against the healthcare sector. Any healthcare related stocks became volatile on the heels of any statement or tweet from Donald Trump. Shortly after the inauguration, Trump stated that drug companies are “getting away with murder” when speaking to the drug pricing issue. Now he’s come out and stated that he’s working on a “new system where there will be competition in the drug industry.” Every time any of these remarks were tweeted, they immediately resulted in a downtrend across the entire biotech cohort. As the new proposed health care legislation enters its initial stages in Congress, a level of certainty has entered the picture, and the drug pricing threats are not perceived to be as bad as initially feared. Recently the index has had a resurgence moving from $284 to $321 or 13% over the past month. As the political headwinds continue to abate, I feel the index has room to continue its upward trend. Continue reading "IBB - Biotech Catches Fire... Finally" →

Should We Believe The 'Transitory' Story?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


The bond market may have stopped listening to the Federal Reserve, but that doesn't mean we shouldn't know what the voting members of its monetary policy committee are thinking. What's clear is that they're not as united as they were at their last meeting just two weeks ago, when they voted nearly unanimously to raise interest rates by 25 basis points, with only Minneapolis Fed President Neel Kashkari voting against.

Now, no sooner was the vote cast, but it appears that it at least one member, maybe two, have misgivings about voting for the increase. At the very least, they're not as much in a hurry to raise rates again soon, if not until the end of this year, if not even later.

Still, as you would expect – or hope for – in a body of intelligent people, there's a strong difference of opinion on what the Fed should do next as it concerns interest rates. Continue reading "Should We Believe The 'Transitory' Story?" →

Janet From Another Planet

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


For most of the past 10 years the financial markets have been led if not actually directed by the all-knowing, all-seeing Federal Reserve. But over the past year or so the roles have changed, or at least the markets have basically stopped listening to the Fed.

Case in point: Last week the Fed, largely as expected, voted 8-to-1 to raise short-term interest rates by another 25 basis points; Minneapolis Fed President Neel Kashkari, who wanted to keep rates unchanged, was the lone dissenter. The Fed has now raised its benchmark federal funds rate three times since last December.

Normally, that move should have induced long-term rates – which are set by traders and investors in the bond market, not the Fed – to rise, too. But that hasn’t happened. In fact, long-term rates have gone in the other direction, falling to their lowest levels since last November, to the point where the yield curve – the difference between short-term and long-term rates – has flattened out to a point we haven’t seen in years.

Last week the yield on the U.S. Treasury’s benchmark 10-year note ended at 2.15%, which is down nearly 50 basis points from a recent high of 2.63% three months ago. Over that same period, the yield on the three-month T-bill has risen by about 25 bps, from 0.75% to 1.01%. That means the difference between the two has been cut to about 115 bps from 188 bps in just three months.

Why the disconnect between what the Fed is doing, and thinks is happening, and what the bond market perceives is really happening? Continue reading "Janet From Another Planet" →