One of the major differences between the United States and China in the current trade conflict is that the Chinese economy is ensnared in a long-term deleveraging crisis in its real estate markets. The Chinese Real Estate Climate Index, released by China's National Bureau of Statistics, stands at ... READ MORE >
Economics
Market minute: Complacency in markets understates growing risk
The investment grade corporate bond spread, which recently fell to its lowest level since 1997, indicates that investors are sanguine about risk across asset markets. This lack of concern is showing up in other measures of risk as well: Moody’s investment grade less 10-year yield, our preferred ... READ MORE >
Volatility in markets: Hedging risk in an era of growing uncertainty
Consumer spending, private business investment and government expenditures have kept the economy growing above potential over the past few years. Yet both business investment and the pace of hiring have recently been decelerating back into line with a more modest pace of growth. This is the normal ... READ MORE >
Market minute: Rebar prices and dying disinflation
Over the past two years, disinflation in the price of goods, and, in some cases, outright deflation allowed the economy to avoid a recession and for unemployment to decline into what is widely acknowledged as full employment. But this relative price stability is now at risk with the prospect of 25% ... READ MORE >
Initial claims rise slightly as federal layoffs and wildfire impact was muted
The number of initial claims for jobless benefits rose slightly to 219,000 last week, close to our forecast and the pre-pandemic average of 218,000. New claims have trended lower since last August as the 13-week moving average touched 218,000 after peaking at 235,000, a sign that the labor market ... READ MORE >
Market minute: Soft economic landing at risk
The Federal Reserve is on the verge of achieving that rarest of economic feats: A soft landing. The rapid disinflation that the Fed has engineered over the past two years mirrors that of the 1990s—the last time the central bank achieved such a difficult feat. That disinflation set the stage for a ... READ MORE >
Housing starts plunge amid severe weather and elevated mortgage rates
Housing starts pulled back in January following a spike in December. The number of starts in January declined by 9.8%, driven by declines in both single-family and multifamily homes. December’s figure was revised upward to 16.1%. The data suggests that the decline was not just a normal pullback from ... READ MORE >
Market minute: Canadian dollar remains under duress
While net long positions on the U.S. dollar versus its Canadian counterpart are below the peak of last October, the possible onset of significant tariffs on Canadian imports into the U.S. has taken a toll on the Canadian dollar. Should higher tariffs on Canada announced by the United States take ... READ MORE >
Market minute: The ripple effect of higher European defense spending
The emergency defense summit in Paris on Monday on the eve of negotiations over the war in Ukraine strongly implies that a large increase in defense spending among European Union nations is coming. That outlay may be as large as $3.1 trillion over the next decade, Bloomberg reported. Any such move ... READ MORE >
Market minute: U.S. housing supply is not meeting demand
U.S. housing completions have declined from a cyclical high of 1.763 million annually last August to a recent low of 1.544 million. That decline is likely to continue and fall below 1.45 million given that homes under construction ended last year at 1.431 million. Although housing starts are a more ... READ MORE >