Macro-Economics

Technical Review

Tit for Tat Tariffs

I’m not a fan of using tariffs as a blunt instrument or protectionism.

The Peterson Institute for International Economics estimates that free trade after 1950 cumulatively boosted the U.S. economy by $2.6 trillion, or $19,500 a household. A 2021 study by Oxford Economics and the U.S.-...

Global Economic Report

FOMC on Hold

Niels Bohr won the Nobel Prize for Physics in 1922 for his work on the atom. After Sweden was taken over by the Nazi’s, Niels Bohr emigrated to the US in 1939. He was a member of the Manhattan Project in 1942 that eventually developed the first atomic bomb. Despite his...

Global Economic Report

A Year of Disruption

During Chair Powell’s December 18 press conference, Powell used the word uncertainty 10 times as he discussed the outlook for the labor market, inflation, the level of the neutral rate, and how President Trump’s agenda could impact monetary policy.

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Global Economic Report

Economic Uncertainty

After the FOMC meeting on November 7 Chair Powell began the press conference with an opening statement that presented a review of the progress monetary policy had achieved in the last two years. “ The Fed has been assigned two goals for monetary...

Technical Review

Economic Uncertainty

There were many issues that led more Democrats to vote for President Trump in the 2024 election, but inflation and the economy were the top 2. Numerous polls prior to the election showed 65% of voters rated the economy as poor or not so good. On the issue of the economy voters favored President...

Global Economic Report

What Happens In China Matters

According to data from the World Bank, the average annual increase in global GDP since 2010 has been around 2.7%, including large fluctuations depending on the year. During that same period GDP growth in China averaged 6.8%. After China joined the World Trade...

Technical Review

Reasons for More Volatility

The Bank Credit Analyst (BCA) has analyzed employment data by each state and their analysis suggests the labor market isn’t as strong as it appears on the surface. BCA weights each state’s unemployment rate by the size of its labor force in order to create a synthetic national unemployment. BCA...

Technical Review

Watching the Economic Surprise Index

After the FOMC lowered the Funds rate by 0.50% at the September 18 meeting Wall Street quickly jumped on the 0.50% bandwagon and expected the FOMC would deliver another large cut at the meeting on November 6 or at the December 18 meeting. There were a number of reasons why this was unlikely....

Global Economic Report

Regulatory Growth Throttle

In coming months the pace and size of rate cuts will be totaling dependent on future economic data. In his post FOMC press conference Chair Powell made this point clearly. “In considering additional adjustments to the target range for the federal funds rate, the...

Technical Review

Economic Slowing Outweighs Rate Cuts

In July the labor market softened notably with job growth falling to 114,000 from 179,000 and the Unemployment Rate jumping from 4.1% to 4.3%. My guess was that the labor market would show some improvement in August as noted last week. “ I think the larger risk is that the Unemployment Rate...

Global Economic Report

The Path of Monetary Policy

The Path of Monetary Policy

Travel is the embodiment of discretionary spending and it provides a reflection of how people feel about their personal finances and the economy. In 2019 (pink line) 2,500,000 people were traveling leading up...

Technical Review

Recession Signal Premature

During the press conference after the July 31 FOMC meeting Chair Powell did his best to avoid providing any hint about a rate cut at the September meeting as I suggested last week. “ Based on Chair Powell’s statements I think Chair Powell will avoid providing any hints since he doesn’t want to...

Global Economic Report

The Point of No Return

In the 1954 movie “ The High and the Mighty ” a flight from Honolulu to San Francisco loses one of the four engines and the loss of gas. The engine crisis occurs just beyond the point of no return. The point of no return is where the option to turn back is no longer...

Technical Review

Waiting on the FOMC

The first estimate of second quarter GDP was stronger than expected with growth pegged at 2.8% compared to 1.4% in the first quarter. After subtracting -0.42% from GDP in the first quarter inventories were rebuilt in the second quarter and added +0.82% to GDP. I discussed how a decline in...

Technical Review

The Economy Is Slowing

Prior to an FOMC meeting the Federal Reserve’s staff compiles the ‘Beige Book’ for FOMC members. Each of the 12 Federal Reserve districts contacts businesses within their district for an assessment of the economy and gathers economic data pertinent to that district. That information is sent to...

Technical Review

Lower Inflation Spurs Rotation

In June the Headline CPI declined by -0.1% led by declines in Gasoline (-3.9%), Oil (-3.8%), Airline Fares (-5.7%), and a moderation in Shelter inflation from an increase of 0.4% in May to 0.2% in June. The decline in Shelter inflation brought monthly Core down to 0.1% from 0.2% in June. On a...

Technical Review

Softness in Services and Labor Market

Services comprise 80% of GDP so changes in the level of growth in services will determine when and how much the economy slows. One month doesn’t make a trend but it can offer a clue. In June the ISM Services Index declined from 53.8 in May to 48.8 in June a rather large drop in one month....

Global Economic Report

Heightened Risk = Caution

The expert and you are in a car and the expert is driving. After awhile, you notice that the expert is driving the car by looking through the rearview mirror. Concerned you ask him why he’s not looking ahead as he drives. He replies...

Global Economic Report

Be Careful What You Wish For

Wall Street has been obsessed with guessing when the FOMC will lower the Funds rate for the first time and the number of times in 2024. It’s been an instructive process. In December many on Wall Street forecast the FOMC would make the first rate cut at the March...

Technical Review

Data Has Delivered Negative Surprises

Wall Street is convinced that the economy will strengthen in the second half of 2024 and enable earnings to grow by more than 10% in 2024. The increase in confidence is doubling interesting since recent data has consistently been weaker than forecast.

The Citi Economic Surprise Index (...

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