- Post historic 10% corrections, the setup is usually determined by whether there is a recession or not.
Macroeconomics
Snippets on the big picture.
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.
U.S. Fiscal Position
- U.S. fiscal deficit stands out vs. other advanced countries.
- Source.
Weak Demand?
- Despite a continued PMI below 50, mentions of weak demand on company conference calls (as of 17th October) are falling.
Rising Term Premium
- Despite the yield whipsaw last week, 10-year rates were starting to price in a term premium, likely due to worries about the US fiscal position under Trump.
- Source.
Globalization’s Resiliance is Partly Tax
- “Globalization has also persisted because the Trump-Ryan reforms to the U.S. corporate tax system, implemented through the Tax Cuts and Jobs Act (TCJA), did not end tax-related incentives for U.S. firms to offshore production and profits.“
- A reversal of the latter could be an issue for big pharma and semiconductor firms.
- China’s export-led growth strategy is the other, admittedly larger, driver.
- Blog post here and full paper here.
High Yield Credit Spreads
- Historic low.
- Source: Top Down Charts.
Consumer Price Index
- “Of all the economic statistics produced by the U.S. federal government, none has a direct impact on the lives of everyday Americans quite like the Consumer Price Index.”
US R&D Spending is Surging
- In the last decade, spending on R&D in the U.S. has surged.
- Almost entirely driven by businesses.
- More than offsetting the multi-decade decline of government spending on R&D.
- Source.
