Notes on the Week Ahead

A Line in the Sand on Inflation

The phrase “drawing a line in the sand” has an unhappy history.  In the U.S., it is said to have originated with Colonel William B. Travis, who drew a line in the sand at the Alamo declaring his willingness to fight and die rather than surrender.  In 2008, following the takeover of Bear Stearns earlier that year, federal authorities drew a line in the sand and let Lehman Brothers go bankrupt.  And in recent weeks, Fed officials have seemed to draw a line in the sand on inflation.

For the podbeam description, can we add the following line towards the end: “For additional insights from Dr. David Kelly, listen to the Insights Now podcast.”

The Global Inflation War

Normally, the great challenge in talking about the global economy is finding a theme.  The economic fortunes of nations are usually driven by such a disparate array of political, financial, demographic and environmental cross-currents that it is impossible to establish a framework for analysis.  Twice however, in this still young century, events have unfolded to provide just such a theme as the world battled the global financial crisis in 2008 and the global pandemic in 2020.

For additional insights from Dr. David Kelly, listen to the Insights Now podcast.

The Inflation Cold Front

After weeks of steamy hot temperatures, a cold front is set to move through the Boston suburbs on Tuesday. While the relief will be nice, in truth, the temperature will only edge down from the low 90s to the low 80s. However, it is the start of something and, as we are well aware in this part of the country, longer-term forces will bring us much colder weather before too long.

Twists and Turns on the Road to a Better Investment Environment

The long history of financial markets, like most classic novels, is full of misunderstandings, miscalculations and mistakes. Despite all of this, the story normally twists and turns its way to a happy ending. This may yet be the case for investors in the very unusual economy that has unfolded following the pandemic recession and recovery.

From Allegro to Adagio: Growth, Inflation and the Fed

When engaged in the more mundane tasks of my job, I often have classical music playing in the background. A piano concerto, in the hands of a great orchestra and soloist, is a delight to the ears as the rush and energy of the first movement gives way to the softer pace of the second. And when the conductor downshifts the tempo, the musicians follow with effortless precision.

The Lag in the Drag

Last Friday’s strong jobs numbers came as a relief to many who feared that the U.S. economy was quickly sliding into recession. On its face, the June employment report seems to support further aggressive Federal Reserve tightening, leading to higher U.S. interest rates and a further appreciation of the dollar, and offsetting forces impacting U.S. equities.

For additional insights from Dr. David Kelly, listen to the Insights Now podcast.

The Quiet Machinery of Repair

One minor side effect of this terrible pandemic is that we have all become more educated on our own immune system.  Looked at objectively, it is a masterpiece of evolutionary excellence. 

The outward signs of infection are normally easy to see – coughing, sneezing and obvious fever warn other humans to keep away, while our own exhaustion makes us less mobile and thus less likely to infect.  The extraordinary havoc wrought by Covid-19 is primarily due to the virus’s ability to make someone contagious even before these symptoms appear.

For additional insights from Dr. David Kelly, listen to the Insights Now podcast.

The Rollover Race between Growth and Inflation

In times long gone by, a popular event at town fairs and school sports days was the sack race.  The competitors would assemble at the starting line, each encased up to the waist in a burlap bag and gripping firmly onto its sides.  At the gun, they would hop furiously in the direction of the finish line, 100 yards ahead.  As a sporting contest, it lacked dramatic tension, with most of the competitors biting the dust in the first 50 yards.  But it was entertaining to speculate on which brave athlete would roll over first. 

For additional insights from Dr. David Kelly, listen to the Insights Now podcast.

Recession Risks and Investment Implications

I refuse to believe, despite gathering evidence to the contrary, that I am getting older.  This being my mindset, I am perpetually astonished by the increasing youth of my colleagues.  According to the Census Bureau, the median age of an American today is 38 years which doesn’t, on its face, sound extraordinary.  However, what it does mean is that most of the people I work with have only experienced two recessions in their adult lives – the recession of 2007-2009 and the recession of 2020. 

For additional insights from Dr. David Kelly, listen to the Insights Now podcast.

The Keeping Cool Heads amidst Hot Inflation

I have been on many delayed flights recently and have a certain sympathy for the pilots who, having repeatedly told us that we would be taking off shortly, have to continually backpedal due to weather or staff or equipment. They always thank us for our patience but in reality they are the patient ones. We, the passengers, are seething, and what’s more, we have suddenly become vocal experts on dodging weather, managing staff and fixing planes. But to get us safely to our destination the pilots have to keep their cool.