Author Archives: Michael Murphy

Dear New World Investor: To no one’s surprise, for the second meeting in a row the Fed made no change to interest rates on Wednesday. They also didn’t change their prediction for two rate cuts later year. But they did raise their estimate of the core Personal Consumption Expenditures (PCE) measure of inflation from 2.5% to 2.8%. I’d say that makes the two projected rate cuts more of a wish than a forecast. They also trimmed their 2025 real GDP forecast from 2.1% to 1.7%, and raised their unemployment rate a tenth from 4.3% to 4.4%. They may be inching...

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Dear New World Investor: Last Friday’s February payrolls report showed 151,000 new jobs, just under the 160,000 expected by economists. It was more than the 143,000 originally reported for January, which was revised down to 125,000. Although the DOGE personnel cuts are starting to bite, the unemployment rate only increased a tenth of a percent to 4.1%. The good news is that we really only need to add about 100,000 to 150,000 jobs a month to keep employment stable, and that’s exactly what happened. Click for larger graphic h/t Yahoo Finance Wednesday’s Consumer Price Index report for February showed a...

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Dear New World Investor: Last Friday’s Personal Consumption Expenditures Index report for January showed the headline number increasing 2.5% year-over-year, a tenth slower than December’s 2.6%. The month-over-month increase was 0.3%, the same as December and right on the consensus. Stripping out the volatile food and energy components, the Fed’s favorite inflation indicator, the core PCE, gained 0.3% last month after an unrevised 0.2% rise in December. Year-over-year, core inflation increased only 2.6% after climbing 2.9% in December. Click for larger graphic h/t Yahoo Finance The 2.6% annual core inflation rate is still too hot for the Fed’s liking, but...

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Dear New World Investor: The recent catch-up rallies in German stocks, financial sector stocks, China technology, and even the ARK Innovation Exchange-Traded Fund (ARKK) mean we are in a “broadening bull.” This is when we suddenly and very quickly have an aggressive broadening of the rally. It could be a “buy the laggards” meme or just a general broadening, but it normally happens in just a fraction of the time that the overall bull has been in place. So what are the next potential laggards to catch up? My guess is (1) junior miners catching up to record gold prices,...

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Dear New World Investor: The headline Consumer Price Index (CPI) increased 3.0% year-over-year in January, a tick above December’s 2.9%. The index for eggs increased 15.2% from December, the largest increase since June 2015. It accounted for about 2/3 of the total monthly food at home increase. Year-over-year egg prices have surged 53%. The index rose 0.5% in January, the largest monthly headline increase since August 2023 and a slight acceleration from the 0.4% rise in December. Economists had expected a 0.3% increase. The core CPI, which strips out the more volatile costs of gasoline and food like eggs, rose...

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Dear New World Investor: It’s wild how quickly people forget Trump’s negotiation tactics. Step 1: Say something completely ridiculous that overshoots his desired outcome. Step 2: Retreat from that stance to something more “reasonable” that was the intended goal all along. Step 3: Get what you really wanted. Step 4: Repeat. Click for larger graphic h/t @AndreasSteno Last Friday’s core Personal Consumption Expenditures (PCE) index – the Fed’s preferred inflation gauge – was right on expectations. The year-over-year core rose 2.8% in December, the same as November. The month-over-month core rose 0.2%, a tenth faster than November’s 0.1%. No big...

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Dear New World Investor: As I expected, the Fed voted unanimously to hold interest rates steady yesterday, its first pause following three consecutive cuts at the end of 2024. They removed language noting that inflation had made progress toward their 2% goal, retaining only that “inflation remains somewhat elevated.” They also said that the unemployment rate has “stabilized at a low level in recent months,” getting rid of “eased.” They said job market conditions remain “solid,” which means they feel no pressure to cut further. We get the next core Personal Consumption Expenditures (PCE) index – the Fed’s preferred inflation...

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Dear New World Investor: Earnings season is upon us. The market is transitioning from rising earnings with easier financial conditions to rising earnings with tighter financial conditions. That’s not bad per sé, but it’s not as good as what we had in 2024 when two-thirds of the gains came from price/earnings multiple expansion. I do expect more mergers and acquisitions activity under President Trump, which means fewer public companies for money managers to invest in. That should underpin a steady rally in the S&P 500. Market Outlook The S&P 500 added 3.1% since last Thursday to new all-time highs today....

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