We continue sharing a collection of charts with you that we find particularly interesting. These charts identify investment and economic trends in the markets.

The character of our economy has been changing for several decades. The 2008 financial crisis resulted in our central bank, the Federal Reserve, becoming much more involved in our economy. This began a series of bond buying (Quantitative Easing, or QE) to supply the banking system with cash and lower interest rates. This was supposed to be temporary, but government programs seldom are.

Then the COVID-19 pandemic and the resulting lockdowns hit. To cope with this tragedy, our government injected an enormous amount of stimulus into our economy, flooding the system with cash, and creating massive new programs that are influencing our economy in a multitude of ways.

The point here is that our economy has changed, and the way financial markets work has changed. Government involvement in our economy has become a major factor in the direction of financial markets.

The current edition reviews the following:

  • The increase in the the Consumer Price Index.
  • The decrease in Interest rates.

Historically, interest rates increase along with inflation as bondholders and lenders expect a positive return above the inflation rate. But the Federal Reserve’s continuing QE, and the massive fiscal spending, which is flooding the system with cash, seems to has both increased inflation AND lowered interest rates. Is it different now?

As always, know what you own, do no overinvest, and stick with quality.

-Cliff Jarvis

Download the July Chartbook