Financial Markets
November 27, 2024
Questions? We've Got Answers: Addressing Issues Impacting the Economic and Financial Outlook
Investors must feel like 2024 has given them whiplash, as expectations for interest rates turn on a dime from one quarter to the next. The Trump trade is the latest catalyst, as the incoming administration's policies are perceived as inflationary, leading markets, and ourselves, to reduce the number of fed rate cuts expected.
November 19, 2024
U.S. Treasury Market Uncertainties: Higher Supply and Shifting Demand
Higher structural deficits are expected to push U.S. federal government debt as a share of GDP to 100% next year and 122% by 2034. This translates to a roughly $22 trillion (or 85%) increase in the supply of U.S. Treasuries between 2024 and 2034.
November 06, 2024
Markets Brace For Higher Inflation and Interest Rates Under President Trump
As of 11 AM ET, Donald Trump has secured 277 of the 538 Electoral College votes, becoming the 47th president. While ballots are still being counted, President Trump also looks to have won the popular vote, which has not happened for a Republican president since George W. Bush in 2004.
October 15, 2024
U.S. Presidential Elections and Stock Markets: It’s the Economy…Obviously
The U.S. Presidential election is just weeks away and investors are quickly turning their attention to the potential implications for financial markets. Would a Trump or Harris win be better for the stock market?
August 26, 2024
Dollars and Sense: Ready… Set... Cut! Cut! Cut!
The Fed is finally ready to cut interest rates, but questions remain on the speed and magnitude. We penciled in 25 basis points per meeting, with over 250 bps in cuts over this year and next. However, now that the Fed is confident that inflation will return to target, it will prioritize a little more of the other side of its dual mandate – developments in the job market – to ultimately determine the speed and size of rate cuts.
July 17, 2024
High Debt Loads Are Common but U.S. Unique in Size of Ongoing Deficits
The United States, like other major economies, has seen a large increase in its debt and deficits in recent years. Most major economies have a need to reduce their deficits to prevent their debt from becoming unsustainable. The difference between the US and its peers is in the trajectory of debt and deficits. Smaller deficits are expected to reduce the debt to GDP ratio in most other advanced economies, but not in the U.S.
July 16, 2024
Smooth Sailing: Analyzing the Drivers of Easing U.S. Financial Conditions
U.S. financial conditions – a measure of the health of financial markets - have eased to their loosest levels since the Federal Reserve started hiking interest rates in 2022. This is largely in part due to robust economic growth that has been complemented by excitement related to generative AI, huge investments in the green transition, and the promise of lower interest rates from the Fed.
June 05, 2024
Sustaining U.S. Government Debt Will Force Hard Choices in the Future
The U.S. federal government has run a deficit virtually every year for the past forty years. In 2024, the deficit will be around 4% of nominal gross domestic product (GDP). Under current policy, the Congressional Budget Office (CBO) projects that it will remain around this level for the next decade. This will lead to an increase in federal government debt held by the public, from 99% of GDP in 2024 to 116% of GDP in 2034.
June 03, 2024
A Sticky Situation: U.S. Shelter Inflation Easing, But Upside Risks Ahead in 2025
Shelter costs have been a key source of stickiness in U.S. inflation. Because housing represents more than one-third of the overall CPI basket, it remains the single biggest contributor to underlying inflation, and a key force preventing inflation from returning to the Fed’s target.
