The dollar and the carry-to-value rotation. It is (probably) premature to mention recession, but that US exceptionalism is moderating should be undisputed. Further moderation would be USD bearish and push us towards final stages of carry-to- value rotation. Cheap low-yielders are thus primed to benefit and equity-hedging flows should become FX-relevant. The u-turn in German …
03/10/2025—Bonds sold off this week with a marked underperformance of Euro area rates following the fiscal u-turn by Germany to boost defence and infrastructure spending. In the US, policy is tilting away from growth and toward a less business friendly direction with a broader tariff impulse and greater fiscal austerity. In addition, the labor market …
The January employment report was a little messier than usual, but the underlying message appears to be that the labor market looks just fine. Nonfarm employment increased by 143,000 last month, a smidgeon below expectations but, big picture, reasonably close to the revised 166,000 average monthly gain seen in 2024. The unemployment rate slipped a …
Risks to the US outlook economic escalated materially over the weekend. President Trump’s executive orders threatening to increase tariff rates on imports from Canada (10% energy, 25% non-energy), China (10%), and Mexico (25%), are set to go into effect at 12:01 Tuesday morning. De minimis imports (under $800) would no longer be excluded from tariffs …
As widely expected, the Fed kept policy unchanged today with a 4.25 to 4.5% target rate. The decision was unanimous among the new set of voters for 2025. The guidance language was left unchanged as anticipated, and Chair Powell argued that both the economy and policy are in a good place now. With risks balanced …
The Employment Cost Index, matched our and consensus expectations with a 0.9% rise in the headline total compensation measure 4Q, or 3.6% at an annualized quarterly pace. This was slightly faster than the 0.8% q/q growth (3.2%ar) in 3Q24, but there has been a pronounced—if choppy—cooling in this measure since peaking at 5.5% in early …
Wages firm modestly in 4Q—ECI against cooling trend. Read More »
The announced pause in federal loan and grant program payments was rescinded on Wednesday, resolving the confusioncaused earlier in the week. This episode highlighted both the breadth and depth of these programs and their importance to the economic life of the American people. Publicly available data suggest these programs play a crucial role in the …
The implications of Trump 2.0 for Ukraine and European defense spending are being widely debated. 2025 financial support for Ukraine looks to largely be in place based on existing agreements. An important question, however, is how to scale up European defense production quickly enough to offset a potential shortfall in US military aid in 2025. …
Europe: defense and Ukraine support under Trump 2.0 Read More »
As broadly expected, the FOMC cut the target range for the fed funds rate by 25bp today to 4.25-4.5%, but as Chair Powell indicated at the press conference, policy is now entering a “new phase” where the Committee will move more cautiously. This hawkish tone was also reflected in other developments today, including the median …
The global impact of resurgent trade tensions The 2018 trade war underscored how damaging the interplay of higher tariffs and business uncertainty can be to global growth. A post-red-sweep roadmap The US election delivered a decisive victory for President Trump alongside a red sweep in the Congress. This creates the potential for significant changes in …
