Monthly Analyses

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Myth & Reality

On March 15, the Fed increased the policy rate by 25 basis points and more or less promised at least two more hikes by year-end. Earlier in the month, Yellen made a speech in which she said: I will spend most of my time today discussing the rationale for the adjustments the Committee has made

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The “Ides of March”

Trump is becoming increasingly isolated politically. He got clobbered both in his immigration restriction initiative and on his promised repeal of Obamacare… Meanwhile, March also saw the Fed confirming our conjecture that it was “Fed up with foot dragging”. And that´s not a pretty sight. According to San Francisco Fed president John Williams: I recently

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Fed “Fed up with foot-dragging”

The second half of the month of February was notable for Fed “consistency” (note: nv=non-voting member) 14-Feb Janet Yellen: “Further adjustment likely needed if economy on track”. 14-Feb J. Lacker (nv): “Next hike should come sooner rather than later”. 15-Feb E. Rosengren (nv): “2017 growth could require faster rate hikes”. 15-Feb N. Kashkari: “Have to

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What do markets believe?

The November 2016 election gave “birth” to the “reflation story”. There was a lot of excitement, with long-term yields, the dollar, stocks and inflation expectations all rising. But this is illusory. Since mid-2014, the economy was testing new depths. Soon after Janet Yellen took the helm, the Fed embraced the “tightening talk”. In late 2015,

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Cooling down

During the month of December, the “Trump-jump” observed following the November 8 election cooled down. The charts for Bonds, Stocks, Inflation Expectations and the Dollar illustrate. Those moves are consistent with expectations of higher growth and somewhat higher inflation, brought about by market participants focusing on talks of supply-side reforms (deregulation) and increases in government

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The month of Trump

The market moves since election day are big, but not new. They are mostly the acceleration of a trend that was under way since mid-year. But the acceleration is telling us something about the President-elect. According to Mark Lilla, a Columbia University political scientist and historian and author of “The Shipwrecked Mind: On Political Reaction”

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This was never just a recession

Maybe to start with, but not for long. What does a recession look like? Take, for example, the 1981/82 recession, which was deep. Real output falls strongly, but reverts to the long-term trend. The present cycle looks very different. Real output also fell strongly, but never recovered. That´s what happens when the outcome is a

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The calm before the storm?

September was a very boring month. At months’ end, asset prices remained about the same as they were in the beginning, with intra month fluctuations being almost perfectly offset.   August 31 September 30 S&P 500 2170.95 2151.13 Dollar Index 86.77 86.37 10-yr Yield 1.57 1.59 At the beginning of September, the probability of a

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In the early part of the month there were tentative signs that the Fed would do something.  Bill Dudley, of the New York Fed, recognized that growth was weak and monetary policy only moderately accommodative. On August 15, John Williams of the San Francisco Fed published “Monetary Policy in a Low R-star World”: [M]onetary policy

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Someone once said “humans are pattern-seeking story-telling animals”. That´s true in general and for economists in particular. At times like the present, when uncertainty is high and sentiment volatile, trying to “pin-down” where we are and get some indication of where we are going is a useful endeavor, even if the suggested outcomes are not

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