Macro The US economy is not slowing down, and most point to the increases in budget deficit and fiscal stimulus from debt overlay, which kept going for the last four years. Some go as far as to say that since the pandemic, the government is spending so much money that it’s hard to have a recession. The US debt to GDP ratio is approaching 125%, and at the current pace,…

Macro After every major economic shock or recession, people tend to become more conservative, more price-sensitive and economically cautious, and they tend to save more. However, after the COVID, it was the opposite. People locked at home increased their good consumption and started speculating in financial markets; later, when they were allowed to socialize and travel again, they went on revenge spending. This increased consumption has fueled high economic growth…

Macro Based on all upcoming macro data, the FED is highly unlikely to cut rates as much as the market expects. CPI and PCE reported this week that they are falling but above expectations. Most of the resilience in inflation comes from the services sector, which is mostly a post-COVID catch-up. The overall mosaic of the data emboldens the FED’s patient stance. It is unlikely that there will be a…

Macro There are worries that “the last mile will be the hardest” in the inflation battle and that, historically, inflation spikes are coming in wavers. We have to be cognizant of the inflation acceleration risks, but the fear that inflation will spike again significantly might be overblown. Except for the “unknown unknowns”, such as unforeseen supply shocks and pressure from new geopolitical developments, there are no apparent drivers to the…

Macro Blockbuster US Jobs Report gives a surprisingly strong start to 2024, showing that the labour market remains remarkably resilient. The payroll report nearly doubled economists’ forecast (185k), adding 353k jobs in January, and significantly revised December’s number from 216k to 333k. Hourly earnings jumped 0.6% in January (faster than December and November gains of 0.4%) for a 4.5% TTM. Although a weaker labour market is not a prerequisite for…

Macro Inflation data shows that prices are on a steady decline path, supporting the Fed’s easing case. Both PCE and PCE deflator are now almost reaching the level seen before the pandemic. On the other hand, strong spending and stable GDP growth point to a soft landing. These two effects combined created a Goldilocks scenario for risk assets. Since the FED acknowledged its accomplishment of cooling down inflation in the…