Banking Archives - Uncommon Sense Investor

Explaining the Inverted Yield Curve & Why It Matters

Fri, 10 Mar 2023 15:46:01 +0000

So, the yield curve is inverted. What does that mean? Well, going back to the 1950s, it has a perfect track record of predicting recessions (except for one time in the 1960s), technically two consecutive quarters of negative growth. The yield on the U.S. Two-Year Treasury Note (some use the U.S. Three-Month Treasury Bill) has been above the yield on the U.S. 10-year Treasury Note for about nine months. The short end of the curve, the two-year, is tracking short-term interest rates, and the longer-end, the 10-year, is generally reflecting expectations for economic growth. The mainstream media caught up to the story this week because the yield curve inverted the most since the recession of 1981 (10-year below the two-year by 110 basis points, as of this writing). Keep reading for more on the inverted yield curve and why it matters to your portfolio...

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When Will the Fed Stop Hiking Rates?

Thu, 04 Aug 2022 16:32:01 +0000

There's been premature talk in financial markets about a "Fed pivot". That the U.S. central bank is already indicating it will stop its interest rate increases sooner than later. That's news to the yield curve of two and 10-year U.S. Treasuries, which remains inverted, implying more rate hikes and slowing economic growth. But, at some point, the Fed will end its battle to reel in inflation and stop raising rates. The question is when. J.J. Johnston has some thoughts on the matter from our live show.

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These Three Large Caps Are Attractive for Long-Term Investors

Tue, 02 Aug 2022 16:05:24 +0000

Check out this segment from our live show in which J.C. O'Connell, Director & Associate Portfolio Manager at Davis Rea, details three large cap stocks that are attractive from an historical perspective.

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Five of the Best Stocks for the Rest of 2022

Mon, 18 Apr 2022 13:51:32 +0000

This year hasn't turned out as expected so far for a lot of investors. The most significant war in Europe in 70 years and surging inflation have a way of ruining the best-laid plans. But that doesn't mean there aren't ways to profit for the rest of the year and beyond. Kiplinger has assembled a list of 22 stocks to consider for the rest of 2022. We've culled five of them from a cross-section of sectors based on name recognition, growth potential, defensive characteristics, and dividends.

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Seven Attractive Bets from Legendary Stock Picker Bill Miller

Fri, 25 Mar 2022 16:58:22 +0000

Bill Miller famously beat the S&P 500 for 15 straight years as co-founder and portfolio manager at Legg Mason Capital Management. His returns lately have not been as stellar but his insights into investing are always keenly received. Miller's latest missive is a case in point as he advises investors to embrace the uncertainty of the moment, and details the sectors and types of stocks that have the highest probability of success right now. Here are the hi-lights.

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Is the Fed Leading the Economy Straight Into a Recession?

Tue, 22 Mar 2022 15:31:59 +0000

Reading or hearing about government bonds can be boring for many investors because they're not as sexy as stocks. But there are times when bonds and their movements really matter, which is now. Short-term U.S. Treasury yields continue to surge as investors price in higher interest rates. U.S. Federal Reserve chairman Jerome Powell seems determined to raise interest rates aggressively as exemplified by his hint on Monday the Fed may move its key rate up by 50 basis points at their next meeting in May. The market is ramping up expectations that the Fed is going to hike rates as many as eight times this year. On the other end of the spectrum there are definite signs the central bank may be leading the economy straight into a recession.

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“These Risk Moments Are Opportunities”

Fri, 11 Mar 2022 15:48:40 +0000

Having managed client money through every crises and period of market volatility since the 1987 crash is helping John O'Connell navigate the current turbulence and wild market gyrations triggered by Russia's invasion of Ukraine. Find out how the Chairman, CEO and CIO of Davis Rea Investment Counsel is tactically managing risk, how investors should deal with the current challenges, what the effect of the war will be on the economy and corporate profits, and why he thinks Russian President Vladimir Putin has made a "colossal mistake." Watch our conversation here.

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Oil Shocks + Rising Rates Preceded Recessions 10 of 10 Times Since 1954

Fri, 04 Mar 2022 16:41:34 +0000

This is ominous. Major run-ups in oil prices when put together with the U.S. Federal Reserve raising interest rates has caused a recession 100 per cent of the time over the last 68 years. That's according to compelling research by Josh Steiner, CFA, Sector Head, Financials at Hedgeye Risk Management. Will history rhyme this time? That could depend on the length of the Russia and Ukraine war and whether the Fed delivers on market expectations for five or six rate hikes. In these excerpts from an Early Look report, Steiner details each oil spike since 1945, and the economic result, along with the Fed's "predictable and recurrent pattern".

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“Central Banks Are Not Going to Crush the Economy by Slamming the Brakes.” Here’s Why.

Thu, 24 Feb 2022 20:43:39 +0000

The invasion of Ukraine by Russia has thrown a major wrinkle into the debate about how high the U.S. Federal Reserve Bank and Bank of Canada can raise interest rates before hurting their respective economies. Some forecasters say the Fed will raise rates as many as nine times. Others say not a chance. And that they'll be lucky to raise twice before having to pause. Here's some insight on the conundrums for central banks from John Johnston, Economic Advisor, Davis Rea Investment Counsel, and his colleague John O'Connell, in the final instalment of our five-part video series, Future Proof Your Portfolio: Five Global Themes Impacting Your Investments.

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What Massive Government, Corporate & Household Debt Piles Mean for Investors

Fri, 18 Feb 2022 19:53:36 +0000

The world is awash in trillions of dollars of debt. Governments, corporations, and households, especially in Canada, have piled up massive amounts of IOUs. How manageable is that debt as interest rates go up? And how high can rates go before causing financial and economic problems?

Have a look at some great charts that illustrate this unprecedented debt story, find out how we got into this mess, and how central banks have to walk a tightrope to avoid a debt disaster.

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