Deep Dive

DEEP DIVE: Slicing & Dicing Inflation

Oct 20, 2023 7 min read paid

Most economists, including Debbie and me, believe that if the data don’t support our forecasts, then there must be something wrong with the data and that they will be revised to show we were right after all. Most economists, including yours truly, also often dismiss components of headline indicators that don’t support our story and look to the remaining “core” indicators for conformity to our outlook and therefore

Ed Yardeni

DEEP DIVE: What's Behind the Recent Bond Rout?

Oct 13, 2023 5 min read paid

Why did the 10-year Treasury bond yield soar from 3.97% on July 31 to 4.81% on October 3 (Fig. 1 below)? There are several explanations, and the answer is probably “all of the below.” Consider the following seven points: (1) Too much supply of Treasuries. We’ve been arguing that the deluge of Treasury supply has been the main driver of this rout in the bond market. The

Ed Yardeni

DEEP DIVE: The Debt Crisis Scenario

Oct 5, 2023 4 min read paid

Debt Crisis I: A Plausible Scenario? “We’re going to have a debt crisis in this country,” Ray Dalio, the founder of hedge fund Bridgewater Associates, warned in an interview with CNBC’s Sara Eisen that aired last Thursday. The two were speaking at a fireside chat at the Managed Funds Association. “How fast it transpires, I think, is going to be a function of that supply-demand issue, so I’

Ed Yardeni

DEEP DIVE: Everyone's Making Semiconductors

Sep 28, 2023 4 min read paid

Large tech companies have been jumping into the semiconductor industry. Amazon, Google, Tesla, and others have developed semiconductors for use in their own operations instead of buying all of their semiconductors from Nvidia, Intel and the like. Custom-made chips tailored to their company’s specific requirements can perform better and are cheaper to make than buying other companies’ chips in the market. In the case of AI server chips, companies

Ed Yardeni

DEEP DIVE: Inflation: The 1970s Again?

Sep 18, 2023 6 min read paid

US Economy I: Raising Odds of a Recession a Tad On July 31, Debbie and I lowered our odds of a recession. We wrote: “Our script has played out as expected so far. The soft-landing scenario looks increasingly like a no-landing one. As a result, we are raising the odds of a no-landing scenario from 75% to 85% and lowering the odds of a hard-landing scenario from 25% to 15%

Ed Yardeni

DEEP DIVE: S&P 500 Forward Earnings Remains On Recovery Road

Aug 31, 2023 4 min read paid

The stock market rallied from Friday through Wednesday despite Fed Chair Jerome Powell’s hawkish speech at Jackson Hole on Friday. The rally received a bullish jolt from July’s JOLTS report on Tuesday morning showing both fewer job openings and fewer quits than expected during the month. These are bullish developments, as we discuss further below, because they suggest that the labor market is “rebalancing,” with demand for labor

Ed Yardeni

DEEP DIVE: Misleading Economic Indicators?

Aug 24, 2023 3 min read paid

While we await Fed Chair Jerome Powell’s Jackson Hole speech on Friday, which is bound to impact the financial markets, let’s review the latest composite economic indexes. The Conference Board compiles the Index of Leading Economic Indicators (LEI), the Index of Coincident Economic Indicators (CEI), and the Index of Lagging Economic Indicators (LAGEI). July’s indexes were released last week on Thursday. Collectively, they are a mixed bag.

Ed Yardeni

DEEP DIVE: Here Are Five Bearish Arguments That Haven't Worked So Far

Aug 9, 2023 4 min read paid

Let’s revisit our upbeat response to the most frequently cited reasons to be worried about a recession: (1) Falling leading indicators and M-PMI. The Index of Leading Economic Indicators (LEI) peaked at a record high during December 2021 (Fig. 7). It is down 9.4% since then through May. The LEI correctly anticipated the previous eight recessions with an average lead time of 12 months. We’ve previously shown

Ed Yardeni

DEEP DIVES: Inflation, Symmetry & Shockwaves

Aug 7, 2023 2 min read paid

Inflation tends to be a symmetrical phenomenon. It tends to come down as quickly or as slowly as it went up when measured on a y/y basis. We can see this consistent pattern in the CPI inflation rate for the US since 1921 (Fig. 1). The inflation symmetry has been particularly pronounced in the goods-producing sector (Fig. 2). That’s because goods prices tend to respond quickly to changes

Ed Yardeni

DEEP DIVE: Quantum Leaps

Jul 24, 2023 2 min read paid

Artificial Intelligence is just one of several technological innovations that are likely to drive the economy during the Roaring 2020s. The promise of quantum computing—and what humans can accomplish with such vast amounts of computing power—makes scientists giddy. Google, Amazon, Microsoft, and IBM are leading the race to develop these computers and offer access to them in the cloud. Here are some recent developments in the area: (1)

Ed Yardeni
Jackie Doherty

DEEP DIVE: The Worry List

Jul 8, 2023 4 min read paid

Economists who are still forecasting a recession typically offer four reasons. First is the inversion of the yield curve. Second is the drop in M2. Third is the significant tightening of monetary policy resulting from the increase in the federal funds rate combined with quantitative tightening (QT). Fourth is that consumers’ excess saving accumulated during the pandemic could run out as soon as September. A more immediate risk to the

Ed Yardeni

DEEP DIVE: Baby Boomers Retiring With $75 Trillion In Net Worth

Jun 28, 2023 4 min read paid

When the Fed started to raise interest rates aggressively last year, there was lots of speculation that it would cause a recession. Housing certainly fell into a recession as housing starts plunged 25.7% from a peak of 1.80 million units (saar) during April 2022 to a trough of 1.34 million units during January and April 2023 (Fig. 1). Consumer spending adjusted for inflation has been on a

Ed Yardeni

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