In the year ahead, trade tensions between the United States and China are likely to spill over into a trade skirmish at best and trade conflict at worst. A Chinese economy caught in a debt and deleveraging trap is likely to face the additional strain of a sharp increase in tariffs on goods sold into ... READ MORE >
Capital flows into the U.S. to challenge global economy
The U.S. dollar on a trade-weighted basis has increased by 7.53% over the past year because of growth and interest rate differentials between the U.S. and its major trade partners. The dollar is set to soar in the next year amid an expansionary fiscal policy and a new tariff regime. The combination ... READ MORE >
As European economy deteriorates, ECB needs to be more aggressive
Good morning. The European Central Bank is clearly going to need to get far more aggressive in its easing campaign as the continental economy, led by the underperformance of Germany and France, slips back into pull of recession’s gravity. The ECB should now consider a 50-basis point cut at its next ... READ MORE >
The U.S. economic year ahead: Regime change, growth and rising interest rates
Since the American economy emerged from the shocks of the pandemic, we have made the case that it is undergoing a fundamental structural change. The end of historically low interest rates, the adoption of policies aimed at bolstering vital national industries and the influx of foreign capital have all ... READ MORE >
Hurricanes and sticky service and housing prices propped up inflation in October
The disinflationary trend that has worked its way through the economy for much of the year modestly abated in October as the top-line consumer price index increased by 0.2% and the core rose by 0.3% on a monthly basis. On an annual basis, those figures increased by 2.6% and 3.3%, ... READ MORE >
To contend with higher tariffs, businesses need to act now
With higher tariffs likely under the incoming Trump administration, businesses are already making decisions in a way that will affect economic growth and reshape the global economy. We are already getting questions on pulling forward expected orders for durable goods to avoid the increase in ... READ MORE >
Fed cuts rate by a quarter point ahead of a possible pause
The Federal Open Market Committee reduced the federal funds rate by 25 basis points on Wednesday to a range between 4.5% and 4.75%. Slowing inflation and strong productivity gains imply that the Fed has ample room to keep cutting rates next year. The major takeaway from the policy statement is ... READ MORE >
The Trump restoration and the U.S. economy
The Trump restoration was resonating across financial markets on Wednesday with the prospect that Donald Trump's second presidential administration will almost certainly bolster economic conditions should a round of tax cuts occur next year. Under such conditions, one should expect rising disposable ... READ MORE >
The increased attractiveness of corporate bonds as the Fed cuts rates
We expect the Federal Reserve to cut its policy rate by 25 basis points at its meeting on Thursday to a range between 4.5% and 4.75%. We anticipate an uneventful meeting given its proximity to the presidential election and the flexibility that the Fed will need heading into its December meeting ... READ MORE >
Distortions in the October U.S. jobs report mask underlying strength
The October jobs report is to be taken seriously but not literally. Once one adds the downward revision of 112,000 jobs for August and September to the 12,000 gain in October, there was a decline in total employment of 100,000 inside the report. We would urge investors, firm managers and ... READ MORE >