Notes on the Week Ahead

The most urgent task facing investors in the wake of the 2024 elections is figuring out how much of the Trump agenda, as broadly outlined on the campaign trail, will be put into effect. A full and literal implementation across taxes, trade and immigration could have unwelcome consequences for the economy in both the short and long run. A more partial implementation, (which seemed to be anticipated...

The last few weeks have seen spectacular weather in New England, with warm temperatures and blue skies almost every day. By now, we would normally have stored the back-yard furniture inside to prevent it getting ruined over the winter. But instead, on weekend afternoons, Sari and I drowsily read our books in the sunshine with the still-loud chirping of the crickets letting us pretend that summer i...

Growing up in Dublin, I had a well-earned reputation as a child of very healthy appetite. At birthday parties, I’d always make sure, at the outset, to get my share of any cocktail sausages, cucumber sandwiches or Rice Krispie treats going around. When it came time for cake and ice cream, I made sure my plate was amply stocked. And I know my mother was filled with pride, (and the other young mother...

On Tuesday, the Commerce Department will publish international trade data for August. The numbers will, undoubtedly, show a deficit – the U.S. has run a trade deficit every year since 1975. This, in turn, implies that the U.S. dollar exchange rate is too high – we buy everyone else’s stuff because it’s cheap; they don’t want to buy ours because it’s expensive. That being said, even as Americans ha...

I have a habit, or so my wife tells me, of staring intently, for minutes at a time, into an open refrigerator, in search of one particular item. When she can no longer stand it, or when the binging of the refrigerator alarm informs the world that its contents are now thawing, she gently asks me what I am looking for and points it out, sitting, as it always is, right in front of my nose. I had a si...

On Thursday, the Bureau of Economic Analysis, commonly known as the BEA, will release revised data on the national income and product accounts going back to the start of 2019. This is an annual process, usually only mildly interesting to economists and ignored by everyone else. However, this year it’s more important since it could help clarify the trajectory of the economy at a critical time for b...

Cutting short-term interest rates from a peak is a little like hauling a piano down a flight of stairs. The operation is best done slowly and with care. The Federal Reserve will probably show some awareness of this in their actions and communications this week. That being said, one of the greatest identifiable dangers to the economy and markets today is that the Fed, by acting too aggressively or...

On Wednesday of next week, the Federal Reserve will almost certainly embark on its long-anticipated easing cycle. However, whether the first cut in the federal funds rate is 25 or 50 basis points is still very much in doubt. This is a crucial question for the economy and financial markets since a 50 basis point cut might well do more harm than good if businesses, consumers and investors saw it as...

The U.S. working age population is growing relatively slowly. The Bureau of Labor Statistics estimates that the U.S. population aged 18 to 64 grew by less than 0.1% over the past year.

Every August, for more than 40 years now, the Federal Reserve has held a retreat in Jackson Hole, Wyoming. It has become an important venue for Fed communications and investors this week will be focused on Jerome Powell’s speech, to be delivered at 10:00AM eastern time (or 8:00AM Wyoming time) on Friday. The topic of this year’s conference is “Reassessing the Effectiveness and Transmission of Mone...

The last two weeks have provided a vivid reminder of how sensitive markets can be to small changes in the macro-economic outlook. With a nudge down in oil prices, the Fed’s 2% inflation goal suddenly seems achievable within a matter of months. With a slight weakening in the labor market, the unemployment rate has shifted to a trajectory that has foreshadowed recession in the past. In response, the...

We live at a time when extreme voices get the most attention and so it is tempting, following a string of weak economic numbers, to yell the word “recession”. However, a balanced assessment of demand and supply suggests that we are, thus far, merely transitioning to slower growth. A slower growth path is a more vulnerable one, particularly because excessive monetary ease is more likely to weaken t...

My wife, Sari, and I love old movies and one of our favorites is the Long, Long Trailer, staring Lucille Ball and Desi Arnaz.  Desi and Lucy are newly-weds who decide, instead of buying a house, to purchase a trailer home which they hitch onto the back of their car and set off on their adventures.  Soon, without any idea of how to drive such a contraption, they find themselves ascending into the S...

Despite a slightly higher-than-expected payroll job gain, the June employment report was on the soft side, with downward revisions to payroll gains from prior months, a drop in temporary employment and only modest gains in wages.  However, the weakest aspect of the report was the unemployment rate, which edged up from 4.0% to 4.1%.  This, in itself, wouldn’t be particularly notable were it not for...

The play, entitled “Steadily She Slows”, has, from a dramatic perspective, turned out to be a dud. It started with such a promising prologue of pandemic, recession, recovery, political upheaval, war and inflation. However, it has since settled into a drawn-out, repetitious script, wherein the lead actor, consumption, hogs the center stage and the supporting cast, in the form of investment spending...

As a young lad growing up in South Dublin, I received certain geography lessons on where I could, or could not, safely roam.  In particular, I was warned not to stray north of O’Connell Street.  I remember debating my mother on the issue, once when I wanted to go to a movie at a theatre near Parnell Square.  I can’t remember exactly what I said, but I probably claimed that bad things didn’t happen...

Every three months, the 19 members of the Federal Reserve’s Federal Open Market Committee, of FOMC for short, aided, no doubt, by an army of econometric minions, work up new forecasts for key economic variables and their assessment of appropriate monetary policy.  In recent days, as they have huddled in their offices engaged on this task, they’ve had much to be thankful for.  The economic roller c...

For centuries, economists have extolled the almost magical properties of competitive markets.  In the 1770s, Adam Smith wrote about an “invisible hand” by which individuals end up promoting the common good even though they only ever intended to do themselves a bit of good.  In the 1970s, Milton Friedman spoke passionately of the virtues of a free-enterprise system in boosting innovation and produc...

One of the most common plotlines in all of literature is when a protagonist, overestimating the gravity of a situation, responds with a series of unfortunate decisions. Perhaps the classic example of this is Romeo, not appreciating the difference between a sleeping Juliet and a dead Juliet, but the pattern has played out in innumerable stories. When it comes to the state of the economy, it seems c...

The importance of any piece of economic information depends on your time horizon.  For traders, the issue is how it will move markets today.  For politicians, its relevance lies in how it could shape public opinion between now and the next election.  However, for long-term investors, what really matters is how it will impact the economic and financial environment for decades to come.  From this la...

The most common scavenger bird in the western United States is the turkey vulture, more commonly called the turkey buzzard.  It is a marvel of evolution, with keen eyesight and an extraordinary sense of smell, allowing it to locate the recently deceased from miles away.  Ungainly as it takes off with furious flapping, once in the air it is a majestic creature, soaring thousands of feet upwards on...

I have never been blessed with any skill in golf.  However, I do have some imagination and so I can imagine a situation in which I am lining up a long and difficult putt.  With well-justified humility, I wince as I strike the ball, knowing it will miss.  However, even two or three seconds after sending it on its way, I realize that, surprisingly, I’m still not sure how it will miss – I can’t quite...

Since the advent of modern financial markets, bonds have always had the reputation of being conservative – rather like an elderly family lawyer in a leather-bound chair frowning at more jumpy and excitable stocks.  Bonds would never make you rich.  However, they would provide you with a moderate, steady and dependable income.  This reputation was challenged in the 1970s and 1980s by Treasuries yie...

Growing up in New England, our sons had a privileged childhood as sports fans and particularly as football fans. Between 2001 and 2020, the New England Patriots, coached by Bill Belichick and with Tom Brady at quarterback, competed in nine super bowls and won six of them -  a truly extraordinary performance in a league of 32 teams.  It is all the more impressive because of the NFL’s efforts to mak...

Next Monday, I once again get to lace up my shoes and join my friends from the Dana-Farber team in running the Boston Marathon.  This year will be particularly special, as both of our sons are also running the race. One of the advantages of being an older member of the team, (and I can testify to plenty of disadvantages), is that you accumulate advice that you can share with younger members, parti...