Equity futures are under pressure following yesterday’s Fed meeting. My view is that the reason for the weakness in futures this morning has more to do with the upside breakout of the Ten-Year Treasury versus anything the Chairman said at his press conference.

We may soon find out just how embedded secular inflation fears have become.

The surging momentum of populism and subsequent polarization is making it harder for our American democracy to accomplish the goal of the prudent stewardship of our current economy and our longer-term economic well-being.

On July 20th, the CBO published, “The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget”. How bad will our deficits and national debt get? We have no idea.

Stephanie Kelton's book, The Deficit Myth, challenges the belief that deficits matter, arguing that as a sovereign nation, we will never run out of money. However, the current state of the US economy, with low potential GDP and tight labor markets, suggests that deficits do matter, and measures need to be taken to reduce them and balance monetary policy.

20% of GDP growth in Q1’23 came from manufacturing construction, a subsector of the economy that normally accounts for only 1% of GDP. But there will be negative unintended consequences to so much government directed investment in the long-term.

While few economists have gotten it right this year, but the sheer randomness of 2023 may have many celebrating prematurely.

Tim explores whether house prices will revert to the mean or if prices are likely to remain at a high-water mark for an extended period of time.

Last week Tim was one of two keynote speakers at a financial services conference along with Cathie Wood, CEO of ARK Invest. Cathie, a notable investor in disruptive tech, has said “AI is going to produce the most massive productivity increase in history. The productivity gains are going to be astounding and shocking.” Tim discusses the importance of productivity gains if the US is going to be able to manage the current debt and deficit challenges.

Looking at many economic data points can reinforce individual biases whether you are a bull or a bear. Tim makes the point that money and ego are powerful forces that can overwhelm calculated decision making.

This week Tim shares his thoughts on the Debt Ceiling, Central Bank Balance Sheets, and Housing.

What can we glean from Fed hikes, regional bank woes, and Q1 earnings.

There is a mountain of evidence suggesting a recession is near, but this cycle has been characterized by some supportive dynamics that are unique from previous cycles.

In this video, Tim discusses what to expect during quarter 2 2023, and the factors stressing today’s economy.

What Wall Street sell-side analysts expected to happen over the past 2 years and what happened are dramatically different. When will negative earnings revisions matter?

I thought I would share the two charts that I think are most important to what is going on with equity markets and with the Fed. The top chart shows the correlation of the S&P and the Fed balance sheet. As I wrote last week, the markets love a bailout. The economy has clearly slowed through the first quarter. Credit availability is sharply contracting and earnings estimates for the S&P in Q1 are expected to decline by 7% y/y. So why are risk assets rallying? I think this chart tells you all you need to know. I would also add that when so many macro investors (Hedge Funds) are positioned short, that creates a bid under the market as those entities have to cover their short positions to manage risk as the market rises.

Tim explores the question: Is bad economic data good for the stock market?

Goldman’s Head of Commodity Research said yesterday, “OPEC’s pricing power is the highest it’s ever been.” The Saudi’s want oil in the $90 to $100 range. They see demand weakening globally, so they cut production. Importantly, they aren’t worried about losing global market share because US shale production is no longer the threat it had been due to shale’s declining productivity and declining rate of resource investment.

The China demand recovery hasn’t materialized like the oil bulls hoped. Makes sense given the property sector is already overbuilt and and the Chinese export economy isn’t getting any help from slackening European and the US demand.

We have plenty of things to worry about in the US economy with the cost of debt going up and its availability going down, but European bank CoCo’s probably isn’t one of them.  

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