Friday, October 5, 2018 Market Comment – Random thoughts - by Jeff Caughron

Random Thoughts

  • Another solid jobs report (at least the headline numbers)… trend intact, wage growth holding at higher levels, Lowest UE rate since Joe Namath won a Super Bowl ring.  Also worth considering…
  • Per David Rosenburg - “The last time we had such a tight labor market, a recession followed within a year”. 
  • Markets (including the labor market) always feel the best at the top 
  • All news is old news 
  • Everything’s higher except broad-based inflation. 2s, 10s, Fed Funds … all are higher than they’ve been relative to inflation in years. Is the market anticipating phantom inflation…?  If so, might a reversal be forthcoming? 
  • Earnings from the bond portfolio performance improve in a rising rate environment, but only if you consistently average-in. 
  • Banks having a good year are wise to “weed and feed” the investment portfolio as we approach year-end.  
    • If you want to adjust the portfolio to enhance earnings, improve credit, enhance cash flow, etc., now is the time to do so.
    • Banks should look to offset losses in a good year and enhance future earnings from the investment account.

US 10yr T-Note, 2yr T-Note, Core Inflation & Fed Funds: 2012 – Today