Brian Pretti's Blog

All the chatter from the Fed about interest rate levels, forward guidance, tapering, etc. is largely noise. In a consumption driven economy, wage growth is the accelerant of consumption growth, not rising equity and real estate prices through the illusory "wealth effect".

Throughout the current economic cycle I have continually referred to the characterization of “the tale of two economies”. Specifically, I have been struck by the dichotomy between the fate and fortunes of large US companies relative to their much smaller business brethren.

Moving into the New Year, hopes for an acceleration in economic activity had been relatively high, especially compared to the sequester challenged early part of the prior year. Of course the very harsh weather across a good part of the US in recent months has...

Everyone is fully aware that the current equity market cycle has been characterized by lack of expanding volume. Is this why the current environment has been described as the rally no one believes? Or the most hated rally in recent memory?

Right now, the S&P is more extended above its 200 week moving average than anything we have experienced since 1999. This is only the fourth time we have seen this type of extension in six decades. No predictions of some imminent demise, rather a “lesson” from direct historical experience.

It should be more than apparent to investors in today’s world that both anticipating and staying in harmony with the direction of currencies is crucial in the process of global asset allocation. As we look back at 2013, it seems clear that global central banker actions in large part helped shape investor behavior.

I’ve written many a time over the past year about the directional dichotomy between the equity market and real economy. To be honest, this is old news. I’m personally convinced that what is most important to financial assets in the current moment is the weight and movement of global capital and the immediate “needs” of various pools of global capital.

Around this time each year the theme of the Great Rotation is dusted off and taken for a spin around the track by financial market pundits far and wide. Of course they are referring to the anticipated movement of capital from the bond market to the stock market.

Over the past few years, I’ve written many a time about the fingerprint character differences we are seeing in the current economic and financial market cycle relative to historical experience.

In my bi-weekly missives I usually discuss a topic germane to financial markets. This time around I’m going to throw you a curve ball and discuss the US housing market. We know the mortgage markets and housing itself were very much the locus of excess in the prior cycle and in very good part responsible for the actual economic and financial market downturn.