Mind the Macro

Michael Roberts and Jeff Baldwin
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Weekly economic insights from Professional Forecasters in under 20 minutes

  1. 25 THG 4

    Behind Blue Skies

    This week, we discuss recent macroeconomic releases, including retail sales, pending home sales and the flash composite PMI, as well as Kevin Warsh’s Senate confirmation hearings and the war in Iran. At first glance, some of the data appeared to point to stronger growth. Under the hood, however, the figures continued to tilt toward stagflation. For instance, headline retail sales rose 1.7 percent, but the figure is not adjusted for inflation and is likely to look far less robust in real terms. Although we had expected Kevin Warsh to favor lower interest rates and look through recent inflation pressures, our view is that the FOMC is likely to resist that approach and keep rates unchanged, particularly after its policy mistakes in 2021, when the committee wrongly dismissed a surge in inflation as transitory. Finally, we discuss equity market froth and the war in Iran.

    27 phút

  2. 18 THG 4

    Dancing in the Dark

    This week’s data offered a mixed but telling picture of the American economy, spanning the Beige Book, fresh readings on inflation and housing, and a further climb in equity markets. Housing, often a bellwether of cyclical momentum, continued to soften. Existing home sales fell short of expectations, while the Housing Market Index also declined, underscoring waning confidence among builders. Inflation, as measured by the Producer Price Index, surprised to the downside on the headline figure, though recent month over month gains suggest underlying pressures remain uncomfortably firm. The Beige Book, drawing on regional Federal Reserve surveys, described an economy marked by subdued growth, rising inflation expectations, and elevated uncertainty linked in part to the war in Iran. Against this backdrop, equity markets have staged a relief rally, pushing major indices to fresh highs. Yet the character of the advance is notable. Unlike earlier phases of recovery, leadership has not come from cyclically sensitive or higher risk assets, but from companies perceived as higher quality and more resilient, often benefiting from structural tail winds. The shift points to a market that is advancing, but with caution, as investors seek shelter even while bidding prices higher, betraying a lingering unease about the durability of the expansion and the path ahead.

    24 phút

  3. 10 THG 4

    All That Glisters Is Not Gold

    This week’s data offered a familiar tension: reassuring headlines paired with more concerning underlying dynamics. The latest employment report appeared strong at first glance. Payrolls exceeded expectations and the unemployment rate declined. Yet the details tell a different story. Research from the Federal Reserve Bank of San Francisco suggests that unusually warm weather materially distorted the data, implying that payrolls may in fact have fallen by roughly 79,000 rather than rising by 178,000. If accurate, that would mark the largest weather-related divergence in the series since 2015. The unemployment rate, too, deserves skepticism. Both employment and labor force participation declined. The drop in the unemployment rate was therefore less a sign of labor market strength than a reflection of arithmetic: the labor force shrank faster than unemployment itself. It is a softer dynamic than the headline suggests, and one that aligns with your broader theme of a labor market losing underlying momentum. The inflation side of the ledger was equally uncomfortable. The latest Personal Consumption Expenditures report from the Bureau of Economic Analysis showed real disposable personal income slipping by 0.1 percent, even as both headline and core PCE rose by 0.4 percent month over month. In other words, purchasing power is being squeezed at the same time that inflation remains firm. That combination is rarely benign. Layered on top of this is the geopolitical backdrop. The conflict in Iran continues to inject uncertainty into energy markets and, by extension, inflation expectations. Oil’s volatility is not just a market story; it feeds directly into the policy dilemma facing the Federal Reserve, which must weigh persistent inflation pressures against signs of a softening economy. Taken together, the picture is not one of resilience but of fragility. Strong headlines are masking weaker foundations, while inflation remains uncomfortably elevated. It is precisely the kind of environment in which markets begin to question the narrative rather than accept it.

    26 phút

  4. 7 THG 4

    Flows over Fundamentals

    This week, we examine rising strains in subprime credit, an end of quarter market rally that may say more about flows than fundamentals, and a deteriorating situation in the Middle East, along with our normal overview of macroeconomic releases. Delinquencies in subprime debt have climbed to their highest level in over a decade. Yet the system is not as exposed as it once was. Subprime balances now account for roughly half the share of total debt seen before the Global Financial Crisis, suggesting a more contained, though still notable, pocket of stress. Equity markets, meanwhile, finished the quarter with surprising strength on March 31. The move looked less like a reassessment of economic prospects and more like the mechanical force of pension rebalancing at quarter end. In other words, flows rather than fundamentals. Geopolitics adds another layer of uncertainty. Tensions in the Middle East continue to escalate, with the potential to reverberate through energy markets and inflation expectations at an already fragile moment for the global economy. As a note, this episode was recorded on April 1 and does not include the employment report released on April 3. We will return to that data, and its implications, in our next discussion.

    22 phút

  5. 28 THG 3

    The Gathering Storm

    This week turns on a series of disquieting signals across markets, from unusual moves in interest rate futures to mounting strains in private credit and renewed geopolitical risk surrounding Kharg Island, all against the backdrop of a sharp decline in equities. Uncertainty has come to dominate both bond and equity markets, each retreating markedly over the course of the week. Interest rate futures have shifted to reflect a higher likelihood of further tightening by the Federal Reserve, a view that is not without logic given recent inflation dynamics. Yet the same markets assign virtually no probability to rate cuts before October, an omission that suggests investors may be systematically underestimating the risk of a downturn in which policy easing would be the more likely response. At the same time, a growing number of private credit vehicles have moved to limit redemptions. While this step is often defended as a means of preventing destabilizing runs, one that may simply displace rather than extinguish the pressure, investors are likely looking elsewhere in their portfolios to raise liquidity and reduce risk, potentially transmitting stress into more liquid asset classes. Layered on top is the prospect of an escalation around Kharg Island, a development that would carry material implications for energy markets and, by extension, inflation. Taken together, these strands point to a market that is beginning, perhaps belatedly, to confront the fragility of the economic foundations on which recent optimism has rested.

    25 phút

  6. 21 THG 3

    Inflation, Iran, and the Fed That Cannot Cut

    This week’s discussion surveys a more troubling turn in the data, as rising producer prices, falling new home sales, and a sharp steepening of the yield curve combine to reinforce a narrative of stagflation and a possible recession. Producer prices in February surprised to the upside and point to firmer core PCE in the near term. Inflationary pressures look set to intensify further in March, as higher oil prices tied to the conflict in Iran begin to feed through the data. Housing offers little reassurance. New home sales in January fell 17 percent from December, while sales of speculative homes dropped to levels below those seen at the depths of the financial crisis. Prices are now beginning to soften, suggesting that demand is faltering even as supply adjusts. Against this backdrop, Chair Powell struck a cautious tone at the March FOMC press conference, emphasizing elevated uncertainty while continuing to prioritize inflation within the Federal Reserve’s mandate. Markets have taken notice. Expectations for rate cuts have faded, with some investors now contemplating the possibility of higher policy rates in 2026. The bond market has moved accordingly. Longer term Treasury yields have risen to their highest levels in six months, signaling tighter financial conditions ahead. In our view, a combination of rising long term rates and further firmness in short term policy would risk placing additional strain on an already fragile economy and a labor market showing signs of stress.

    27 phút

  7. 13 THG 3

    Oil's Whiplash and Stagflation's Squeeze

    This week, we discuss the war in Iran and a run of discouraging economic data, including falling payrolls, rising inflation and a downward revision to fourth quarter GDP. The most dramatic market development was in oil. Prices surged to $120 per barrel early Monday before plunging to $90 by Monday afternoon, the largest decline on record. The fall followed comments from President Trump suggesting the conflict would soon end. Yet the administration later walked back those remarks, leaving oil trading near $100 by the end of the week. The turbulence in energy markets arrives at an awkward moment for the economy. Signs of stagflation appear to be intensifying. Nonfarm payrolls fell by 92,000 in February, marking the third decline in the past five months. At the same time inflation remains stubborn. Core PCE, the Federal Reserve’s preferred measure, rose 0.4 percent month over month in January after a similar increase in December. With energy prices rising sharply in recent weeks, the March reading is likely to come in even higher. The growth picture is weakening as well. Fourth quarter GDP was revised down to 0.7 percent from an initial estimate of 1.4 percent, a revision that underscores the increasingly fragile state of the economy. Taken together, the combination of softer growth, falling employment, and persistent inflation may complicate the Federal Reserve’s plans to begin cutting interest rates and tip the economy into recession.

    23 phút

  8. 5 THG 3

    Inflation, Iran and the Ghost of Executive Life

    This week we examine the implications of the war in Iran and the rising uncertainty now weighing on financial markets. Since our previous episode, titled “Inflation Intensifies Amid Credit Cracks,” the inflation outlook has deteriorated sharply as the conflict has pushed energy prices higher. In the near term, stronger inflation now appears almost unavoidable, arriving at a moment when the economic backdrop was already fragile. We also look to history for guidance on the risks building in private credit. In particular, we revisit the collapse of Executive Life Insurance in the late nineteen eighties and early nineteen nineties, when heavy exposure to high yield debt ultimately proved fatal. The episode offers a useful lens through which to consider how stress in private credit might unfold and how losses could spread into other parts of the financial system. Finally, we reflect on the unusually uncertain environment facing investors. Will the conflict prove brief or prolonged? No one yet knows. What is clear is that periods of geopolitical uncertainty tend to unsettle markets. For now, that anxiety is showing up in prices, with all three major equity indices in the United States negative for the year.

    24 phút
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Giới Thiệu

Weekly economic insights from Professional Forecasters in under 20 minutes

Thông Tin

  • Nhà sáng tạo
    Michael Roberts and Jeff Baldwin
  • Năm hoạt động
    2024 - 2026
  • Tập
    83
  • Xếp hạng
    Sạch
  • Bản quyền
    © Michael Roberts and Jeff Baldwin
  • Trang web chương trình
    Mind the Macro

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