Dear New World Investor: There’s now $8 trillion in money market funds and CDs. Most of that will stay in some form of fixed income, but some has been waiting for a market drop to buy stocks. Friday’s record S&P 500 close should get some of the sideline money throwing in the towel and buying stocks. Historically, after an all-time high the S&P 500 has outperformed its long-term average one-, three-, six-, and 12-months later. The one-month returns are not quite as strong, suggesting a short-term overbought condition in some cases. One year later, the S&P 500 has risen 13...

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Dear New World Investor: The January Consumer Price Index (CPI) came in at +6.4% year-over-year, its lowest since October 2021 but hotter than expected, and +0,5% month-over-month. The index for shelter accounted for nearly half of the monthly increase and was by far the largest contributor. As we (and the Fed) know, that index badly lags the real-world costs. When it starts picking up the downturn in rent, it will have a large negative impact on inflation that will last longer than before. Actually, it was a silver lining in the CPI data. With rent at -0.3%, closer to the...

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Dear New World Investor: Did non-farm payrolls really rise by 517,000 in January, clobbering the consensus estimate for 185,000? No, they did not. The Bureau of Labor Statistics changed the seasonal adjustment factors retroactively for 2022 and dumped all the changes into the January report. As Bloomberg chief economist Anna Wong wrote: “The January jobs report showed extremely robust growth, higher than the highest estimate in the Bloomberg survey. If it seems too good to be true, that’s because it is too good to be true — the gain is mostly due to seasonal factors and revisions to past data....

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Dear New World Investor: “We can now say for the first time that the disinflationary process has started.” – Fed Chairman Powell, who used the word “disinflation” 12 times in yesterday’s press conference The Fed increased the funds rate a quarter-point yesterday to a new range of 4.50% to 4.75%, the highest level since October 2007. This was right in line with my Fed pivot graphic. Most investors don’t understand that the pivot is a process, not a light switch. Click for larger graphic There was a big change in tone from the Fed. Powell not only said we’re in...

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Dear New World Investor: Last Friday’s “strong” (well, higher than expected) nonfarm payrolls report, +263,000, set off a five-day losing streak in the S&P 500 that ended today. Investors are afraid that the Fed might keep the interest rate pressure higher for longer, thus causing a harder economic downturn in the coming months. As well they might, except…. There’s something really wrong with the payroll survey and the Fed knows it. The payrolls number you saw is calculated by the “establishment” survey of companies. The October survey only had a response rate of 49.4%, equaling a 32-year low (blue line)....

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Dear New World Investor: The markets – bonds and stocks, here and overseas – have been brutal as we spiral towards a classic October bottom. There are two important factors few people are talking about that will stop Fed tightening soon, but first, the one people are talking about: The US Dollar Wrecking Ball. When the Fed raises interest rates, it: 1. Makes US government debt more attractive to overseas investors 2. Which creates demand for dollars to buy the debt 3. Which makes the dollar stronger versus other currencies 4. Which makes investing in US debt even more attractive,...

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As we go into the slow holiday week, the S&P 500 will probably hang around current levels. The daily fractal dimension is up to 48 and climbing as the market consolidates. The short-term is up to 60, and can start a brief downtrend at any time. Gold also is marking time at the 38.2$ retracement level around $1,193. Bitcoin has most likely put in its Month #45 low, and should start to rise at an accelerating rate. I don’t know what the specific catalyst will be, but the Month #45 low is when the exponential rise to Month #64...

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