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Dec 05, 2016 | Post by: Roman Chuyan, CFA Comments Off on How Much Do We Owe?

How Much Do We Owe?

The U.S. aggregate debt is currently $63 trillion, or 337% of GDP. The good news is that debt service dropped in previous years with interest rates. Higher rates began to pressure mortgage applications, but the full effect on the economy remains to be seen. I reiterate my recommendation to maintain

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Nov 21, 2016 | Post by: Roman Chuyan, CFA Comments Off on The Real World – Rates Are Rising, Bonds Dropping

The Real World – Rates Are Rising, Bonds Dropping

Investors are being thrust back into the real world where rates are not zero. The trifecta of market forces – inflation, FX, and China’s yuan – continue to drive rates up. The effect of higher borrowing costs on the economy is likely to be significant. After years of central banks’

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Nov 14, 2016 | Post by: Roman Chuyan, CFA Comments Off on The Trump Sell-Off In Bonds

The Trump Sell-Off In Bonds

U.S. interest rates jumped sharply on November 9th when Donald Trump was called the winner of the U.S. presidential election, which sent bonds plummeting. Today, I will describe market expectations that I think triggered the latest selloff. When it stopped buying bonds in 2014, the Fed’s began the long, drawn-out

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Oct 27, 2016 | Post by: Roman Chuyan, CFA Comments Off on Bonds Continue To Fall – What’s Next?

Bonds Continue To Fall – What’s Next?

As global interest rates began to rebound since reaching all-time lows in July, many investors are asking: is the 35-year bond rally over? In more-recent context, is the central bank experiment that conjured never-before seen negative rates, over? Most observers attribute the rise in rates to the Fed’s expected interest rate

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Oct 12, 2016 | Post by: Roman Chuyan, CFA Comments Off on Why Bonds Are Falling

Why Bonds Are Falling

Bond prices began to fall after peaking in mid-July. Yields, which are inverse to prices, have rebounded: for example, the 10-year Treasury yield rose from a bottom of 1.37% to 1.78% currently, an 18 basis-point rise so far in October – a substantial move in the current environment of ultra-low rates. While

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Sep 22, 2016 | Post by: Roman Chuyan, CFA Comments Off on U.S. Recession Might Begin Within 2 Quarters

U.S. Recession Might Begin Within 2 Quarters

U.S. economic fundamentals have deteriorated markedly since last year, now to an extent that a recession may be on the horizon. Recession dates are declared with a lag of six months or longer – we know that the economy is in a recession at least six months after it has begun. Recognizing

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Sep 09, 2016 | Post by: Roman Chuyan, CFA Comments Off on What’s Next For Bonds?

What’s Next For Bonds?

In their speeches during and after the annual retreat in Jackson Hole on Aug 25-27, Federal Reserve officials sounded more hawkish than most observers expected. Fed Chair Janet Yellen said that the case to raise interest rates is getting stronger as the U.S. economy approaches the Fed’s goals: In light

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Aug 31, 2016 | Post by: Roman Chuyan, CFA Comments Off on Why The Economy Is Slowing

Why The Economy Is Slowing

The U.S. economy is clearly slowing down – real growth was only 1.1% (annual rate) in the second quarter of 2016. Real (net of inflation) growth in gross domestic product is the broadest measure of the health of our economy, and is the main driver of income and employment growth.

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Aug 08, 2016 | Post by: Roman Chuyan, CFA Comments Off on Q2 Earnings: A Continued Decline

Q2 Earnings: A Continued Decline

With the Q2 earnings reporting season drawing to a close, the S&P 500 operating earnings continue to decline. Growth currently stands at -3.5% year-over-year, according to Factset.  Companies beat their carefully-designed targets by a margin that’s consistent with the historical average, 3% to 4%. When Q2 earnings are fully reported, I

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Jul 18, 2016 | Post by: Roman Chuyan, CFA Comments Off on Where Inflation Will Come From –

Where Inflation Will Come From –

Roman Chuyan, CFA July 18, 2016 The Federal Reserve has been trying to boost inflation since the financial crisis, and inflation finally did begin to rise this year. In fact, core (excluding food and energy) consumer price index inflation was at 2.2% in June (the orange line on the chart

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