- “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.
Macroeconomics
Snippets on the big picture.
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.
China and the US
Job Growth Breadth
- Is increasingly narrow.
- Source: KKR.
Economic View is Key for Markets
- Plenty of charts around showing that, if there is no recession after a rate cut, the market is up on a 12-month view.
- If there is, the market could be down. The median decline is 24%.
Restaurant Spending
- Some distortion post-COVID could be causing some reverberations, but it looks fairly weak.
CEO Tenure
- Consumer/retail CEO tenure is surprisingly low compared to other sectors.
- Source.
Economics Data Quality
Mortgage Rates
- US 30-year fixed mortgage rates (orange line, bankrate data) are coming down, pushed by falling 30-year treasury rates (blue line).
- Interestingly, the spread to 30-year US treasuries (white line) went up a lot this rate cycle and remains (2.67%) well above the historic average (1.3%). Normalisation here could be a big boost.
S&P Returns Post Rate Cuts
- 12-month returns are largely positive except in 07/01.
How Japan Transformed
- At the end of the 19th century “Japan transformed from a relatively poor, predominantly agricultural economy specialized in the exports of unprocessed, primary products to an economy specialized in the export of manufactures in under fifteen years.“
- How did it achieve such a feat?
- “In a remarkable new paper, Juhász, Sakabe, and Weinstein show how the key to this transformation was a massive effort to translate and codify technical information in the Japanese language. This state-led initiative made cutting-edge industrial knowledge accessible to Japanese entrepreneurs and workers in a way that was unparalleled among non-Western countries at the time.“
- Source.
Households want to Move
- This suggests pent-up demand once mortgage rates fall.
- Source: Apollo US Housing Slide Deck.
