But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
Why gold isn’t safe for your portfolio when rates are rising
Another asset class that is proving vulnerable to rising rates is commodities. The prospect for tighter monetary conditions is driving the dollar higher and putting downward pressure on many commodities.
Fed Chair Janet Yellen spoke at the Kansas City Fed’s Economic Policy Symposium in Jackson Hole. She indicated that rate hikes could come in faster than the Fed expected if inflation and unemployment reach their goals sooner.
In Yellen’s view, a considerable amount of labor market slack remained. The unemployment rate alone wouldn’t be adequate to judge whether the Fed had closed in on its full employment goal.
Real wage growth has been non-existent over the past few years. Historically, wages tend to increase in a booming labor market. However, Janet Yellen also mentioned that wage growth trends could accelerate temporarily if the labor market continued to improve.
There has been a trend in declining workforce participation since 2000. This accelerated during the Great Recession. Premature workforce exits could be due to the aging baby-boomer population retiring earlier, workers upgrading skills by enrolling in schools, workers getting disability, or workers getting discouraged and leaving the workforce.
Workforce participation is the number of people actively seeking employment divided by the number of people willing and able to work. It determines the amount of labor market slack.
A major disagreement among Fed economists is how to classify unemployment in the economy. Unemployment can be caused by cyclical or structural factors. A number of Fed officials, including Janet Yellen, believe that there’s evidence of significant “labor market slack.” This is caused by cyclical factors.
Over the course of the recession, the Fed modified its monetary policy several times. It made adjustments for changes in the job market. In December 2012, the Fed provided markets with quantitative targets for employment and inflation.
The economy had lost millions of jobs since the Great Recession. To address this, the Fed has kept the federal funds rate at near-zero levels since December 2008. A low interest rate environment would stimulate business investment—this creates jobs.
The Kansas City Fed’s “Economic Policy Symposium” is held in Jackson Hole, Wyoming. It has been organized since 1982. The annual conference attracts central bankers, economists, private market participants, and academics from around the world.
In order to bring about a change in their dependency on NII, Chinese banks are now pushing fee-based services such as credit cards, investment banking, trade settlement, and clearing as well as expansion overseas.
China’s five biggest banks are expected to report a 7% (about $150 billion) increase in combined net income this year, according to Bloomberg.
The nascent shadow banking system in China was further fueled by real estate speculation. Consequently, shadow banking expanded from 3% of GDP in 2010 to 8% of GDP today.
The major reason why China has failed to slow its credit boom is the rise of shadow banking. In simple terms, shadow banking is the creation of credit without regulatory supervision.
According to analysts at the Australia-based ANZ bank, the dramatic lending slowdown in July indicates that the financial system in China is engaging in a rapid de-leveraging process.
As the National Bureau of Statistics (or NBS) in China revealed data showing that the nation’s credit plunged by 86% in July, on August 13, many would have expected the market for Chinese stocks to become jittery.
On August 13, the National Bureau of Statistics (or NBS) in China revealed data showing that the nation’s credit plunged by 86% in July.
China’s economy grew at a stronger-than-expected annualized 7.5% in the second quarter, accelerating from 7.4% during the first quarter this year.
In this series, we’ll help you understand what caused the credit crunch in China, how it could impact growth in China, and how the markets have reacted.
Philadelphia Fed Chief, Dr. Charles Plosser has criticized the Fed’s monetary stimulus program. Dr. Plosser disagreed with the policy statement in the July FOMC meeting because the language was dependent on time. It also didn’t reflect the “substantial progress” that was made towards the Fed’s employment and inflation goals.