The Fed – The End of Patience – The Dove Arrives – Inflation and Trade

The Fed Eliminates Patience from Its Vocabulary The FOMC yesterday removed the word “patience” from its vocabulary and the text of its statement after its June meeting.  Clearly, the FOMC indicated that it would likely reduce the Fed Funds Rate in July.  Without diving into all the words in its statement,  the last phrase in …

Trade War – Neither China nor the U.S. Benefit

The U.S. Economy Shows Mixed Signs The recent mix of economic results suggest that neither China nor the U.S. economies will likely emerge unscarred from the trade war. The New York Fed’s Empire State Manufacturing Survey fell in June at its largest monthly decline on record (see Figure 1). Overall, the composition of various components also showed …

Why Now the Mexican Tariff Threat?

Why Now the Mexican Tariff Threat? — Mexico — A Winner in the Trade War — With China — U.S. Winners as Mexico Wins Tariff Threat Against Mexico — Why Now? A brief note after the tariff threat the President made against Mexico and the resulting agreement. In our view, the timing of the President’s …

China – The Great Digital Wall

China – The Great Digital Wall – Balkanization of the Internet -Supply Chain ABC’s   Napoleon’s Warning — China the Sleeping Giant The trade war with China could not fail to bring to mind Napoleon’s often cited quote on China which seems to be coming to fruition — “China is a sleeping giant. Let her sleep, …

U.S. Potential Economic Growth

U.S. Long-Term Potential Growth — At What Rate? With both the ebbing tax stimulus and the lagging effects of last year’s less accommodative monetary policy, the economy’s potential output will likely decline to an annual growth rate towards 2% by year-end. Economists generally define the economy’s potential output as the normal level of production given …

The Trump Tweet – Two Purposes

First Purpose Last Sunday President Trump threatened new tariffs on Chinese imported goods reflecting concerns over backtracking by China in their trade negotiations. A Reuters’ report suggested that concern arose from a diplomatic cable received from China Friday evening. According to the Reuters report, the Chinese cable contained “systematic edits” to the nearly 150-page draft …

Dr. Harry Markowitz, Father of Modern Portfolio Theory, Is Invested Now

“Nobel Prize winner Harry Markowitz, who conceived Modern Portfolio Theory, is 91 years old, boasts a list of corporate clients as long as your arm and has no intention of keeping his controversial views to himself, as evidenced in an interview with ThinkAdvisor. For starters, here’s what Professor Markowitz thinks of artificial intelligence, the darling …

The Rebound – Now What?

Improving First Quarter GDP Outlook The 2019 first quarter started out with dark clouds and ended with some sun breaking through the clouds. In early March, the Atlanta Fed’s GDP Now forecasted less than 0.5% growth for first quarter GDP growth. Only four weeks later, their first quarter forecast jumped to 2.3%. Many economists showed …

What now? The Outlook.

First quarter economic outlook—reflects the fallout from the last quarter The first quarter’s economic performance will reflect many of the forces created at the end of 2018. These forces included: the sharp equity market decline near year end which tightened financial conditions resulting in the Fed moving to a more dovish monetary policy, the uncertain outcome …