Notes on the Week Ahead

Despite very significant shifts in U.S. economic policy and major geopolitical events, investors can look back at the first half of 2025 with some satisfaction. Through July 3rd, the S&P500 provided a total return of 7.5% for the year, despite being on the brink of a bear market just three months ago. Fixed income has also done well, with 10-year Treasury yields falling by 23 basis points, gen...

On Tuesday, we will release our third quarter 2025 Guide to the Markets.  On Wednesday, we will host conference calls with financial professionals to discuss the outlook.  It’s an outlook dominated by the impact of dramatic policy changes on a relatively slow-growing U.S. economy.  The result, in the short run, may resemble a wave, as the economy cools down in the second half of this year, heats u...

Investors this week will be focused on the implications of the U.S. attack on Iranian nuclear facilities. While this is clearly a very significant event from a geopolitical perspective, it may be less important for financial markets. The key issue is how Iran responds. One often-mentioned scenario is that they could try to close the Strait of Hormuz. Such a move would have a dramatic impact on wor...

When we bought our first home, the builder neglected to mention that it was built upon a river. Of course a river at the bottom of a garden is a charming sight. Something that seeps up through the cellar is less attractive, and so, in due course, the builder was called back to install a sump pump. Our young sons were fascinated by the hole in the basement floor and the coppery water that flowed at...

When I was growing up, school holidays weren’t packed with organized activities. Sometimes, to relieve the boredom of a rainy day, I would tackle a jigsaw – I remember one particularly challenging 1000-piece puzzle which, when completed, promised to reveal a charming picture of Dutch skaters on a frozen lake.

This week, after a very busy few months, I am putting down my pen, picking up my metaphorical spade and bucket and taking some vacation time. 2025, so far, has been a challenging year for analysts and it is tempting, as I’m trying to clear my desk, to assert that not much has changed over the past few weeks and so I don’t need to update any analysis of federal government policy, the economy and ma...

There have only been two U.S. recessions since 2001 – the Great Financial Crisis and the Pandemic Recession. Both of these were huge – accounting for two of the only three times since the 1940s that the unemployment rate has vaulted to double digits. However, because the recessions of our recent memory have been so dramatic, investors may not appreciate the risks from a softer sort of slowdown.

A crowd is gathered around the sickbed of the economic expansion. Among the multitude are the workers, consumers and business people who would be most impacted by its demise. There are political partisans too, some fervently praying for recovery, others quietly hoping for the opposite. At the foot of the bed are fiscal and monetary doctors, the former preparing a sugary solution to inject into the...

Last weekend, I neglected to finish my Notes on the Week Ahead as I got caught up in watching the Masters. In truth, it was mostly a battle between Rory McIlroy’s emotions, which produced two double-bogeys in his final round, and his exceptional skill, which propelled his second playoff shot to within three feet of the hole. I was particularly happy to see his victory since he hails from the same...

One clear advantage of getting older, (and I can attest to many of its disadvantages), is that you learn from experience. The financial market chaos, following the President’s tariff announcement, is different from previous market slumps. Every market selloff is. However, a common thread in all crises is that the best decisions begin with a structured approach to analysis. 

I may have mentioned this before, but as a young lad, I had a very healthy appetite. Consequently, when deciding on a hobby, I prudently elected to go with “cooking”. My experiments included making fudge and my mother dutifully supplied me with sugar, vanilla and helpful advice. However, we possessed no candy thermometer and, as anyone in the fudge-making business will tell you, getting the temper...

I was running along the roads of our neighborhood last weekend when I came upon a small herd of deer. I often see these beautiful but dopey creatures at dawn as they wander aimlessly in the middle of the road. When a car or truck bears down on them, they stop and stare. Perhaps they are pondering whether it would be more fun to hop into the woods to their right or gambol off into the field to thei...

I was at a conference last week and a financial advisor asked me what I thought he should say when a client asked him what was so bad about tariffs. It’s a fair question. Many people who instinctively believe in free trade would still have a hard time in clearly explaining the trouble with tariffs. And since tariffs are likely to be a big issue this week, with the president promising to impose pos...

In December, the Census Bureau announced that the U.S. population had grown by nearly 1% in the year ended July 1st, 2024, marking the strongest annual gain since 2001[1]. Given this, it seems strange to be already talking about slowing population growth. However, the reality is that the gap between births and deaths is continuing to shrink, with almost all of our recent population growth coming f...

In the four weeks since he took office, the president has issued an extraordinary number of executive orders, while promising dramatic change across the full reach of the federal government. While these policy moves have broad political, geopolitical and social implications, for investors, the most important concern tariffs, immigration, the federal workforce and the federal budget. The rapid pace...

For investors, Europe seems like a train in a station, perpetually gathering steam and loading up for a long-delayed journey, but clearly advertising only a modest pace when it gets under way. Such has been the case for the European economy and, even more so, for European equities for many years. This has, of course, been deeply frustrating for those investing in European stocks, which, while ofte...

On Saturday, the White House announced the imposition of heavy tariffs on goods exported from Mexico, Canada and China and all three nations announced their intention to retaliate. These tariffs threaten to raise prices and slow economic activity across all four countries. While the end game of this trade war remains very uncertain, it has the potential to impact bonds, stocks and exchange rates....

This Wednesday, at 2:00 PM, the Federal Reserve will release a statement on monetary policy. It will, as usual, be a brief and colorless document and will look paler still in comparison to the more than 60 executive orders, proclamations and memoranda that have emanated from the White House in the first week of the President’s new term. However, the Fed’s statement and Jay Powell’s press conferenc...

“Unsustainable!” To quote Inigo Montoya: “You keep using that word. I do not think it means what you think it means” For decades, journalists, economists, politicians, and central bankers have said that the U.S. federal debt is on an “unsustainable” path.  However, it has stayed on that path, climbing from a very manageable $3.3 trillion, or 31.5% of GDP, in fiscal 2001, to $28.3 trillion, or 98.2...

In football, it’s always better, at the snap of the ball to disguise your intentions. Are you going to pass or run the ball? Is it a zone defense or man-to-man?  In business or in military maneuvers the same rule applies – keep them guessing. However, in macro-economic management, it is better to make your plans clear.  That way businesses can feel more confident in hiring and investing, as can co...

Over the holiday season, we got to spend some time with our very charming granddaughter and, as a bonus, I am now fully re-acquainted with all the verses of “The Wheels on the Bus”. As we enter 2025, the American economy is rather like an old school bus – slow but steady, reliable and resilient. It generally moves forward. However, it is not invulnerable. The wheels of the bus are being pulled off...

When testifying to the Senate Banking Committee back in 1987, the newly-appointed Fed Chairman, Alan Greenspan, provided some insight into his views on communication: “Since becoming a central banker”, he said, “I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.” His successors have generally tried to be more open with regard to...

Many years ago, I worked for the Office of Revenue and Tax Analysis at the State of Michigan and, from time to time, Saul Hymans and his colleagues from the University of Michigan would visit the state government in Lansing to discuss the latest output from their macro economic models of the U.S. and Michigan economies. As they started into their presentation, I was always eager to hear about thei...

This week will be full of market-moving economic data. We expect purchasing manager surveys and light-vehicle sales to indicate steady demand in November, as investors await Friday’s jobs report. Recent data on unemployment claims point to continued momentum and payroll growth should rebound from October’s meagre reading which was suppressed by both weather and strike activity. Markets will also b...

I’ve been running my own econometric model of the U.S. economy for almost 30 years now. The basic structure is simple. You start by forecasting the components of demand, that is to say, consumption, investment, trade and government spending. This gives you an initial projection of real GDP growth. You then feed this into labor market equations, along with some demographic assumptions, to forecast...