Inside the Eye of the Fiscal and Monetary Policy Storm

Professor Alan Blinder of Princeton University, and former Vice Chair of the Federal Reserve, joins the show to talk about what the Fed missed, which era in history this most clearly resembles, why this recession may be unlike any other, and why rumors of the dollar's demise have been greatly exaggerated. Plus, the ultra-rare Zweig Breadth Thrust Indicator just triggered, which historically means very good things for stocks.

Meet Alan Blinder

Alan S. Blinder has been on the Princeton faculty since 1971, taking time off from January 1993 through January 1996 for service in the U.S. government—first as a member of President Clinton's original Council of Economic Advisers (CEA), and then as Vice Chairman of the Board of Governors of the Federal Reserve System.

Dr. Blinder served as a Member of President Clinton's original Council of Economic Advisers from January 1993 to June 1994. There, he was in charge of the Administration's macroeconomic forecasting and also worked intensively on budget, international trade, and health care issues.

Dr. Blinder served as Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 to January 1996. In this position, he represented the Fed at various international meetings, and was a member of the Board's committees on Bank Supervision and Regulation, Consumer and Community Affairs, and Derivative Instruments. He also chaired the Board in the Chairman's absence.

Dr. Blinder is the author or co-author of 23 books, including the textbook Economics: Principles and Policy, now in its 14th edition, from which over three million college students have learned introductory economics. His best-selling book, After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead, published in 2013, won several awards. 

His latest books include Advice and Dissent: Why America Suffers When Economics and Politics Collide, released in 2018, and A Monetary and Fiscal History of the United States, 1961–2021 , published by Princeton University Press in October 2022. Blinder has written scores of scholarly articles on topics such as fiscal policy, central banking, offshoring, and the distribution of income. He also appears frequently on PBS, CNBC, CNN, Bloomberg TV, and elsewhere.

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Term of the Day: Zweig Breadth Thrust Indicator

This week's term comes to us from Marty Zweig, the legendary investor who was known for racking up huge returns for predicting the 1987 stock market crash. Zweig came up with the 'Zweig Breadth Thrust,' and while that sounds like an Eastern European swimming style—it's not—at least according to Investopedia.

It's actually a technical indicator used to ascertain market momentum. It's computed by calculating the number of advancing issues on an exchange, such as the New York Stock Exchange (NYSE), divided by the total number of issues—advancing plus declining—on it, and generating a 10-day moving average (MA) of this percentage.

The indicator signals the start of a potential new bull market when it moves from a level below 40% (indicating an oversold market) to a level above 61.5% within any 10-day period. This is a rarely-occurring sentiment indicator, which carries tremendous importance with market watchers.

It's so rare, actually, that it's happened just 14 times since 1950. And guess what? The Zweig Breadth Thrust just triggered. More than 93% of stocks were recently above their 10-day moving average. Every year that's happened since 1950, the S&P 500 was higher a year later—every single time. It was up more than 23% on average as well, according to our buddy Ryan Detrick at the Carson Group. Will 2023 be an outlier?

Links for Show Notes

• Alan S. Blinder | Princeton University
  
• A Monetary and Fiscal History of the United States, 1961—2021
• U.S. Added 236,000 Jobs in March, Underscoring Brisk Labor Market
  
• CME FedWatch Tool: Target Rate Probabilities for May 3, 2023 Fed Meeting
  
• Board of Governors of the Federal Reserve System: Assets and Liabilities of Commercial Banks in the United States
• ABA Report: Bank Economists Expect Slowing Economic Growth to Tighten Financial Conditions
  
• The Equity Risk Premium: More Risk for Higher Returns
  
• Breadth Thrust Indicator Definition
  
• Warren Buffett: Stop Listening to Economic Projections