The government aid rolled out to small and medium-size enterprises, which was exhausted after only 13 days, has been problematic at best; at worst, if not changed, it will lag the survival period of many struggling businesses. The U.S. government framework is going to have to be enlarged, include more generous terms for participation and ensure that aid ... READ MORE >
Joe Brusuelas
Bending the curve, reopening for business and avoiding the policy errors of the 1918-19 pandemic
Deaths attributed to the Covid-19 pandemic continue to mount, and data confirms that social distancing and a rigorous system of testing and tracing are necessary to slow the spread of the disease, and are working to mitigate the health crisis. Recent modeling work suggests that the slow adoption of social distancing practices as public policy and the ... READ MORE >
Fed sets up $2.3 trillion in liquidity commitments, introduces Main Street Lending Program
The Federal Reserve made history on Thursday by moving aggressively to provide up to $2.3 trillion in liquidity commitments to support the economy. This policy intends to bolster households, small and medium-sized firms, and the ability of state and local governments to float debt to ensure critical services during the pandemic. But the liquidity ... READ MORE >
Saving small and medium-size business: temporary lending facility needed now
This week U.S. Treasury Secretary Steven Mnuchin told a group of Republican senators they need to act to prevent an increase in the unemployment rate to 20%. While some would say that is political hyperbole, it is not. Policymakers, investors and company managers will observe a jump in first-time jobless claims next week likely to be in the millions and an ... READ MORE >
Fed and Treasury create Commercial Paper Funding Facility to ease credit stress
The U.S. Treasury on Tuesday granted the Federal Reserve 13(3) authority under Dodd-Frank that permits the central bank to take steps under exigent and unusual circumstances to stabilize financial markets and the economy. The U.S. Treasury stepped forward with a $10 billion backstop to fund a Commercial Paper Funding Facility to restart the commercial ... READ MORE >
The RSM Brexit Stress Index shoots up, reflecting coronavirus supply shock concern
Following the U.K.’s departure from the European Union more than a month ago, markets are bracing for a global health crisis and the accompanying supply shock. The RSM Brexit Stress Index -- which measures financial and economic risk surrounding Britain’s departure from Europe’s common market – has shot up in the past two weeks from zero to 1.15 standard ... READ MORE >
An improved outlook for manufacturing filtered by Boeing and the coronavirus
The RSM US Manufacturing Index implies improvement in national manufacturing sentiment in February, and we expect a similar uptick in the February ISM survey of manufacturing sentiment next month. However, February may be the last month before the coronavirus takes its toll on the global supply chain; at the same time, the Boeing shutdown will adversely ... READ MORE >
Negative yields increase as global coronavirus risk proliferates
One of the major narratives inside the global fixed income market over the past year was the rise of negative-yielding debt, which peaked at $17 trillion during the most intense phase of the U.S.-China trade conflict in August 2019. As fears of a wider trade conflict abated, the issuance of global negative-yielding debt eased back to roughly $10 trillion in ... READ MORE >
As coronavirus spreads, what are the fiscal and monetary policy options?
Investors over the past few days have priced in three 25 basis-point cuts in the federal funds rate by the end of the year, with the first cut implied by the markets coming in June. This is somewhat misguided, given the nature of the global public health emergency that is the catalyst for the change in market expectations around monetary policy. Fed ... READ MORE >
U.S. GDP grew an estimated 1.5% in January; household consumption expected to be strongest segment in Q1
The United States’ gross domestic product grew an estimated 1.5% in January, according to RSM’s Monthly Index of Economic Activity. That bump followed GDP growth of 2.3% in the fourth quarter of 2019. We forecast a 1% GDP growth rate with downside risk for the first quarter of the year, with household consumption expected to be the strongest driver of ... READ MORE >