The Attack of the Yellen, A Credit Contraction & Investor Psychology

The Attack of the Yellen and a Credit Contraction

The Money Wise guys kick off this week’s show with a review of last week’s numbers from Wall Street before diving into Fed comments, a credit contraction, and more. The Dow was up 1.2%, the S&P 500 was up 1.4%, and the NASDAQ was up 1.7%. Year-To-Date, the Dow is down 2.7%, but the other two major indices are in the black, with the S&P 500 up 3.4% and the NASDAQ up 13%. The guys jump right into some spicy political commentary and explain why they consider last week a product of an Attack of the Yellen - and they offer a reminder that words have consequences. They also share recent Fed comments and last week’s decision to raise interest rates by a quarter percent, and Kyle and Jeff spar over whether the comments were actually more dovish or not. The Money Wise guys also explain why the market is still a cat on a hot tin roof, totally focused on the banking sector and feeling edgy. They also share Fed Chairman Powell’s quotes about a credit contraction and what consumers might expect.

So, What is a Credit Contraction?

Also sometimes called a credit crunch, a credit contraction describes a decline in consumer lending activity by financial institutions. A sudden shortage of funds usually brings on a credit contraction, and it will often coincide with a recession - which we are NOT in right now. However, with multiple banking failures in recent weeks, many banks and other lending institutions are wary of their own potential bankruptcies or defaults. For borrowers, a credit contraction results in higher interest rates. The Money Wise guys discuss the rate-raising cycle, whether rates may reverse soon, and the exact quote that Fed Chairman Powell made on a credit contraction and its economic consequences.

In the second hour, the Money Wise guys share interesting Investor Psychology insights. You don’t want to miss the details! Tune in for the full discussion on your favorite podcast provider or at davidsoncap.com, where you can also learn more about the Money Wise guys or take advantage of a portfolio review and analysis with Davidson Capital Management.