The big event of August, the one that was going to move markets, was supposed to be Jay Powell’s remarks at the KC Fed’s annual symposium at Jackson Hole. Turns out, his speech was a non-event! The Powell Non-Event The media made it their purpose, prior to his speech, to spotlight the fact that the FOMC members, the Fed’s rate setting committee, are very divided on the appropriate policy, given …Read More
The New Mercantilism Rates Race to the Bottom Currencies Depreciate
During the recent period of world growth, where nearly every country’s exports were rising, there was little incentive for governments to manipulate economic policies to foster even more economic growth. Getting back to “normal” seemed to be the universally adopted mantra, and that implied rising rates and tighter monetary policies. However, today, when world trade is contracting (some of which may be due to “trade wars,” but much of which is due …Read More
What Investors Believe: Central Banks Have Their Backs
In a world of fragile economic growth where the odds of recession have been on the rise, investors are now convinced that central banks (CBs), led by the Fed, have their backs, as they see the CBs as “buyers of last resort.” Note that the Fed, whose legislative mandates are low unemployment and stable prices, has morphed into the role of equity market savior beginning in the Greenspan era and rolling …Read More
The ‘Insurance’ Cut Worry
Fed Chair Powell’s congressional testimony did little to allay market fears regarding the Fed’s underlying posture. Markets continue to be worried that, while the Fed is certain to cut the Fed Funds rate by 25 bps at July’s meeting, the rate reduction may turn out to be just an “insurance” cut, especially in light of the fact that the June jobs report has been portrayed as “strong.” Describing the cut …Read More
Market Hopes: An Easy Fed; End Of Trade Wars. So Far, Neither One Has Happened.
The “expected” scenario, a resumption of trade talks, is what emerged from the G20 meetings. The best the agreement between Presidents Trump and Xi did was to temporarily reduce the specter of further growth killing tariffs. We still have the existing ones that have significantly slowed world trade, created a “soft patch” in the U.S.’s economy, and contributed to the emerging recessions in Europe and China. Capital spending growth is …Read More
Key Indicators Have Peaked; Markets Hope for Soft Landing
The National Bureau of Economic Research (NBER), a private sector company, is the entity responsible for officially labeling recession start and end dates. As a rule of thumb, the financial markets use two consecutive quarters of negative GDP growth as the marker. But, that is not the way the NBER sees it. According to their website, the NBER defines a recession as: “a significant decline in economic activity … lasting more than …Read More
