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August 14, 2019
The proximate causes of the volatility have been building sources of uncertainty, initially from a Fed press conference that appeared less accommodative than markets had hoped and then from escalating tensions between the U.S. and China given a surprise tariff announcement by the U.S. and an unexpected currency adjustment by China.
August 7, 2019
Any hope for a quiet August in Washington was dashed when President Donald Trump took to Twitter last week announcing he would move forward with imposing 10% tariffs on about $300 billion of Chinese goods on 1 September. This threat comes in addition to the 25% tariffs already imposed on $250 billion of Chinese imports to the U.S.
July 31, 2019
President Donald Trump has claimed many times that China has unfairly manipulated its currency. Recently, he lashed out against the European Central Bank (ECB) for hinting at additional monetary policy stimulus because it might drive the euro lower against the dollar. Consequently, investors have become keenly attuned to the possibility of a shift in the strong dollar policy that has been in effect through several U.S. administrations.
July 24, 2019
The Federal Open Market Committee (FOMC) is poised to cut the policy rate at its meeting on July 30–31, but members of the committee are divided. Markets are pricing a 25 basis point (bp) cut, and we believe that is the most likely outcome, but we also see a meaningful chance of a 50 bp cut.
July 17, 2019
U.S. core consumer price inflation (CPI) was firmer than expected in June, with a 0.3% rise that boosted the year-over-year rate to 2.1%. The timing of the strong print is somewhat awkward for Federal Reserve officials who have signaled a willingness to cut interest rates in July.
July 3, 2019
Central banks around the world are pivoting toward easier monetary policy. In some countries this means rates are falling below previous record lows, and in the U.S. the Federal Reserve has paused a rate-hiking campaign and now appears more likely to lower rates than raise them further.
June 26, 2019
June 19, 2019
In recent weeks, renewed trade concerns, slowing oil demand, and a notable acceleration in implied U.S. oil production have spurred a material sell-off in oil. Similar concerns caused oil prices to drop at the end of last year, which prompted OPEC+ (i.e., the Organization of the Petroleum Exporting Countries plus 10 additional oil-producing nations) to cut production, reversing policy set earlier in the year of increasing output ahead of a reintroduction of sanctions on Iran.
June 12, 2019
As U.S. Federal Reserve officials enter the communications blackout period ahead of the June 18–19 FOMC (Federal Open Market Committee) meeting, bond markets are pricing in a modest chance (roughly 12%) that the Fed will cut interest rates by 25 basis points in June, and a much higher (roughly 88%) chance of a cut by the subsequent meeting in late July (source: Bloomberg as of 10 June 2019).
May 29, 2019
Our base case for the global economy over the secular three- to five-year horizon sounds relatively benign – at least at first sight. We foresee a continuation of lackluster economic growth on average. We expect low inflation to persist and central banks to keep interest rates at or below New Neutral levels.
May 15, 2019
In any trade negotiation, the last few innings are usually the most fragile since that is when more difficult issues are addressed, and the U.S.–China negotiations in early May are certainly proof. We had shared in the growing optimism that a deal would be secured given the political appetite on both sides, although we did note the inherent fragility of late-stage negotiations. Even with that caveat, however, the hardline pivot over the week of 6 May and the U.S. decision on 10 May to increase tariff rates on Chinese goods have taken virtually everyone by surprise, including us.
May 1, 2019
Risk assets have staged a remarkable rebound from the dark days of December, but how long can the rally last? In taking a macro approach to the cyclical outlook for asset markets, I often use this simple framework: There are three main macro factors for markets – the business cycle, the liquidity cycle, and the political cycle. These days, each of these cycles is global. The three interact and influence each other, but each has its own key driver.
April 24, 2019
For decades, President Trump has called the North American Free Trade Agreement (NAFTA) one of the “worst trade deals ever made.” More recently, Trump has threatened to withdraw the U.S. from the original NAFTA if Congress fails to ratify the United States–Mexico–Canada Agreement (USMCA), the trade deal that his administration has negotiated to replace NAFTA. This threat may be more than just a negotiating tactic. Here’s why.
