January 14, 2025

By Robert Wiedemer

Rates Are up Because Bond Buyers Are Tired of Taking a Big Beating

What did I say is the number one issue that’s going to affect the stock market this year? Interest rates -- that’s right. And that’s what’s affecting the market right now.

In particular, the long term rate (10 year) is up half percent in a little over a month to 4.8%. That’s because bond buyers are starting to give up hope that interest rates will be coming down soon. After the Fed meeting in December, it’s becoming increasingly clear that they are not. In fact, the market is now only expecting one rate cut of .25% this entire year.

January 6, 2025

By Robert Wiedemer

My investment goal for 2024 was to significantly beat the S&P 500, and I’m pleased to report that this goal was achieved. The Main Model delivered a gain of 34%, compared to the S&P 500’s 24% increase.

Throughout the year, we maintained a bullish outlook despite numerous warnings from pundits and analysts predicting a major pullback. As anticipated, while there were some short-term corrections, the market experienced no significant long-term declines. Our Bull Bear Macro Investment System™ proved to be exceptionally effective, enabling us to navigate market fluctuations with confidence.

December 19, 2024
By Robert Wiedemer

The government’s new fiscal year kicked off October 1 and its borrowing is breaking all records.  In the first two months of the fiscal year, government borrowing was $624 billion.  That’s an enormous amount and we’ve never seen anything like it before. 

December 16, 2024
By Robert Wiedemer

I thought that since we are in the holiday shopping and entertainment season that it was a good time to talk about consumer spending. And, in particular, why a slowdown in retail and restaurant spending may not have a much impact on the economy as some stock analysts or economists imply.

November 6, 2024

By Robert Wiedemer

As I guessed, undecided voters were more likely to vote for Trump than pollsters had expected. That gave Trump the votes he needed to carry the electoral votes in all the three key swing states -- Wisconsin, Michigan and Pennsylvania – and win the election.

And, as I expected, the market reacted well to a Trump victory with a 2% jump overnight. I think the market strength will continue well into next year and the market will do better than it would if Harris had won.

November 1, 2024

By Robert Wiedemer

In the fall season of any year, that terminology is usually used in reference to a baseball team.  As in “How ‘bout those Dodgers!  Pretty impressive team!”  And they were pretty impressive.  Although there’s no question the Yankees did a lot to contribute to their success by allowing FIVE UNEARNED RUNS in one inning in a make-or-break game.  Without those FIVE UNEARNED RUNS the Yankees would have handily trounced the Dodgers – at least in that game after pounding the Dodgers in the previous game.

But so much for baseball.  The season is over.  Now I can say “How ‘bout those bonds!”  Well, they suck and have for four years.  It’s a terrible record.  No excuses.  No offsets like “stocks have done poorly too.”  In fact, stocks have had a stellar rebound in the last two years. 

October 16, 2024

By Robert Wiedemer

In Short, They Haven’t Had Long Term Effects Before – Not Sure Why That Would Change Now

Stock market fears based on geopolitical risks have usually simply turned into buying opportunities in the past.  The downturns were short lived.  Sometimes, there wasn’t even a downturn.  When the US began bombing Iraq in 2003, the stock market rallied. 

October 10, 2024

By Robert Wiedemer

So, why are rates going up if the Fed just lowered rates? 

Because there are two different rates.  The one the Fed cut is the overnight rate.  That’s a very short-term rate and affects short term interest rates such as money market funds.  The rate for money market funds has promptly dropped almost a half percent from 5.20% to 4.75%.

However, the long-term rate -- the 10 year rate – jumped from 3.8% to over 4%.  It’s not directly affected by the short-term rate.  Mortgage rates are driven in part by the 10 year rate and that’s also why they didn’t fall much after the Fed’s announcement. 

September 20, 2024

By Robert Wiedemer

After much debate over whether the Fed would cut rates on their Wednesday meeting by ¼% or ½%, the Fed announced it had chosen the more aggressive ½% cut.  But it still surprised me and a lot of other economists and market analysts.  I had thought they would cut by ¼% now and ¼% at their November meeting.  But clearly Fed Chair Powell wanted to send out the word that the Fed wants to be supportive of the economy and the stock market.

August 15, 2024

By Robert Wiedemer

Short Term Market Mayhem Almost Gone

Despite the mayhem in July, the S&P 500 closed up 1.1%. Despite all the further mayhem in August, the S&P closed today up 0.3% for the month. That means positive movement for the market for almost two months. So much for a major reckoning in the market!

Short term panics don’t last. That’s why I don’t trade them. It’s simply a good way to lose money. But it’s a great way to create something to talk about and to look smart. That’s why so many stock pundits and analysts do it. Lots of show but it creates little dough.

August 5, 2024

By Robert Wiedemer

Japanese Stock Market Has Collapsed

Last night the Japanese stock market, as measured by the Nikkei 225, plunged 13%. When Friday’s losses are added in, the Nikkei was down 18% -- in only two days.

Very scary -- for Japan and world markets just waking up to the news. In fact, the S&P opened today down over 5% but rallied back quickly and closed down “only” 3%.

It was obvious why the Japanese market was down: After decades of easy money policies where the Bank of Japan has kept rates low and printed massively to do so, they have decided to pull back. They are letting interest rates rise and promising to greatly reduce purchases of Japanese government bonds with printed money.

July 3, 2024

By Robert Wiedemer

With all the discussions about the Presidential election post-debate, I thought it would be a good time for me to weigh in with my thoughts on how the election will affect the stock market.

As per my May 23, 2024 update, I was expecting “modest gains in the market over the summer.” That’s not what we got in June. The S&P 500 is up 3.5% month to date. That’s closer to what I was expecting for the whole summer!

Excitement around AI?

Why such a big surge? The usual suspect is excitement over AI and that’s clearly one reason for the increase with NVIDIA, the benchmark stock for AI, being up 15% in June even after the pullback later in June.

However, why the excitement around AI? No big announcements were made. Yes, Musk is constructing his new computer facility for his GROK AI system in Memphis but that’s not unexpected news and not really a big breakthrough. NVIDIA’s great earnings announcement was in May, not June.

May 23, 2024

By Robert Wiedemer

What the April downturn took away, the May upturn more than brought back with the market reaching record highs.

The April downturn was caused by the market’s number 1 nemesis: Higher interest rates. The 10 year rate jumped almost a half percent in April from 4.1% to 4.6%.

The May upturn was caused by the market adjusting to the higher rate (now at 4.5%) and to a quarter percent reduction in the 10 year rate from its high in April due to a better than expected inflation reading for April. That we saw such a quick and solid rebound in the market is likely reflective of a positive mood in the market going forward.

However, this is not the last time we will see this same pattern of interest rate increases playing out over the next year. When interest rates go up again, the market will go down – until it adjusts to the higher rate, as it did in May. The market has shown an excellent ability to adjust to higher rates over the past two years. The 10 year rate has risen from 1.5% two years ago to 4.5% and the market is hitting record highs.

April 25, 2024

By Robert Wiedemer

Gold is on a tear – up 13% year to date! Silver is doing even better – up 15% year to date. Compared to the S&P 500 which is only up 4% year to date and the NASDAQ 100 which is only up 5.75% year to date, it’s a complete blow out.

Sounds like the Aftershock is near? Not a chance. Why? Lots of reasons. First the Fed isn’t printing any money now. In fact, it has vacuumed almost $2 trillion out of the economy since March 2022. Wonder why the 10 year rate is so much higher than 2021?

April 22, 2024

By Robert Wiedemer

Earlier I had reported that the Fed was planning to start reducing its sales of bonds after their March meeting based on information from the Wall Street Journal. Reducing sales of bonds is absolutely essential to keeping the 10 year interest rate from going higher quickly. Well, the Wall Street Journal’s information wasn’t correct. The Fed kept selling bonds right through April and the 10 year interest rate jumped a half percent to 4.6%, which the stock market didn’t like at all.

The good news is that the Economist reports that the Fed will likely announce at its May 1 meeting that it will reduce bond sales in June. In fact, it will reduce them by 50%. Hopefully that will be confirmed at their May 1 meeting. But, for now, it’s a good reason to expect the reduction in bond sales is coming soon, even if it didn’t happen in April.

April 18, 2024

By Robert Wiedemer

All the talk about rate cuts is kind of silly. The economy is doing fine due to massive Congressional borrowing. Inflation is not going lower. It’s very unlikely to go back to 2% as the Fed would like to see. More likely it will bottom out at around 3.5%.

So, why would the Fed want to lower rates significantly? They won’t.

March 30, 2024

By Robert Wiedemer

The market is up a lot and Bull Bear clients have benefited mightily as we’ve called this rally since the beginning of last year. But has it run out of steam?

Well, going forward there’s little doubt that the market won’t be able to maintain the almost 1% a week gains it had in January and February. That’s just too fast a pace for any market.

But will it continue to go up? To answer that question, let’s first look at why it went up.

March 18, 2024

By Robert Wiedemer

Electric vehicles face a fundamental problem: Why buy them?

Nobody really seems to ask that question. Stock pundits and most of the auto industry just assume it is an inevitable transition that will have to occur in the next five to ten years.

By Robert Wiedemer

February 27, 2024

I have often said that China has a bigger bubble economy than we do. And like the US in 2008, when it pops the financial repercussions will reverberate around the world.

Well, it’s popping now, but the worldwide repercussions have been small so far.