- Panel discussion that pre-dates Liberation Day but is nonetheless extremely insightful on the implications of current US trade policy.
- It features:
- Jeffrey Frankel, James W. Harpel Professor of Capital Formation and Growth, Harvard Kennedy School
- Desmond Lachman, Senior Fellow, American Enterprise Institute
- Brad W. Setser, Whitney Shepardson Senior Fellow, Council on Foreign Relations
- Mark Sobel, US Chairman, Official Monetary and Financial Institutions Forum
Macroeconomics
Snippets on the big picture.
Buffett on Trade and Tariffs
- Buffett penned an article in 2003 in Forbes magazine about the yawning US trade deficit and what such a persistent deficit would mean going forward.
- He proposed a neat solution.
Fund Manager Survey – Cash
- No comment.
Slow Start to Spring Housing Season
- “Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said NAHB Chief Economist Robert Dietz. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”
- When asked about the impact of tariffs on their business, 60% of builders reported their suppliers have already increased or announced increases of material prices due to tariffs. On average, suppliers have increased their prices by 6.3% in response to announced, enacted, or expected tariffs. This means builders estimate a typical cost effect from recent tariff actions at $10,900 per home.
- Source.
S&P 500 EPS during Recessions
- The median drop is 13%, but it can be a lot worse.
US Consumer
- A key chart – the driver of global demand growth.
S&P 500 Futures Financing
- The financing rate for equity exposure via futures has been very high.
- The S&P 500® financing spread can’t be directly observed, but it can be estimated by comparing the actual price of futures to the fair value implied by dividend forecasts, interest rates, and spot prices. Figure 1 plots one such estimate since 2012.
- Reasons here.
The setup
- Post historic 10% corrections, the setup is usually determined by whether there is a recession or not.
International Ownership of US Stocks
- Currently at a record.
Recession Arguments
- Great interview with BCA’s Chief Global Strategist Peter Berezin where he lays out his view for the economy and market.
- Peter is a bear (sees -30% drop in SPX) and has been calling for a recession since roughly the middle of last year.
USD and Import Pricing
- The US dollar has a very low pass-through effect to import prices for consumer goods.
- Interesting to think about in the context of tariff environment.
US Capex Plans
- Are turning up across all surveys.
Disasters
- The count and cost of climate and weather events over $1bn in damages keeps rising.
- Source.
Recessions Gone?
- Economic management has gotten good.
German Opinion Polls
- Elections are just around the corner.
- Source.
Housing Completions
- Surprisingly, housing completions increased sharply in 2024 to the highest since 2006.
- Source.
Entrepeneurial Activity Spike
- The post-COVID spike in new business formation at the time looked temporary.
- However, four years later, business formation, especially for high-propensity businesses (businesses that plan to expand and hire employees), has stayed at a new elevated level.
- Source.
UK Business Confidence
- “The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -65 in November 2024 from -52 in October and for the fourth month running.“
- Source.
Industries and Immigration
- Those making policy should probably consider this chart (from a 2017 survey).
- 29% of all workers in agriculture and 25% in construction are immigrants.
- Source.
How to Devalue the Dollar
- Donald Trump and the path of the USD are difficult to analyse, as conflicting forces are pushing in different directions.
- Ultimately if Trump wanted a weak dollar there are things he could do.