Take a deeper dive into the global repercussions of recent political events and explore the economic forces of inflation, wages, interest rates, taxes, unemployment, and national currencies and their potential effects on investors and policymakers, in the U.S. and around the world.
Even though we see the economic outlook as generally favorable after a strong stock market run and re-opening activity, we recognize that market volatility may increase, and some investors may be turning cautious—due to a variety of risk factors.
The logic is that the over long periods the valuation of the stock market should mirror the performance of the economy. However, there can be significant deviations in the interim owing to cyclical forces.
When the international monetary system shifted from a fixed to a floating exchange-rate regime 50 years ago, it was a milestone event that marked the end of a prolonged period of low inflation, strong economic growth, and financial stability.
Since Xi Jinping became China’s leader in 2012, he has taken steps to reverse the trend of allowing China’s communist system to evolve into a more market-oriented model in which private businesses coexist alongside state-owned enterprises.
Investors have faced a nearly 40 basis point drop in Treasury bond yields over the past month. Two competing explanations have been put forth, and it is important to understand both because they have different implications for financial markets.
The bottom line is that in addition to their inherent risks, cryptocurrencies now face added regulatory burdens. For these reasons, we believe privately issued digital currencies should be considered speculative instruments.
The policy shift that is occurring is an opportunity to test the precepts of Keynesian economics that embrace the government’s role in the economy versus supply side policies that favor tax cuts and deregulation.
The $1.9 trillion COVID stimulus plan has been greeted enthusiastically by investors as the U.S. stock market has set record highs. However, with the U.S. budget deficit reaching extreme levels, some economist are concerned the U.S. economy could overheat and lead to inflation.
One of the main objectives of the incoming administration is to counter growing income inequality in America. However, investors are likely to judge the Biden administration’s policies primarily by how they impact the U.S. economy overall.
Congress crafts a plan providing much-needed relief for COVID-19. Several factors coalesced encouraging Congressional leaders to reach an agreement but it may be difficult to sustain the spirit of compromise.
The U.S. dollar experienced a remarkable run over the past decade. March became the turning point coinciding with unprecedented U.S. policy actions to combat COVID-19. The dollar is likely to remain under pressure for the balance of the year and into 2021.
There is a high degree of uncertainty about how the economy will fare in the balance of 2020 and into 2021. Many investors are upbeat that it is headed for a quick recovery, but most economists believe recovery will be gradual and uneven following an initial bounce. What weighs on Fed officials is the possibility of a second wave of coronavirus cases that could hinder the re-opening of businesses.
The May jobs report surprised many investors who were prepared for a large increase in the jobless rate. While the news was a relief to the Federal Reserve, the numbers underestimate the full impact of COVID-19 on labor. Even though the U.S. stock market is back to levels before the pandemic, the path to recovery is still unclear.
While the U.S. government’s efforts to combat COVID-19 will likely lead to a post-war record budget deficit, bond yields have fallen to record lows amid a global recession. The long-term prognosis is problematic, however, because deficits are likely to remain abnormally high this decade.
The conflict over oil and growing worries about COVID-19 marks the first time the global economy experienced simultaneous supply shocks. Markets are now signaling a tipping point has been reached with the global economy on the cusp of recession.