Review and Outlook

"For the second straight year, the biggest economic news of August came in Jerome Powell’s Jackson Hole testimony. In a speech taken as dovish (likely more so than he intended), Powell brought the Fed’s dual mandate back into balance after an extended period in which the price stability mandate dominated. And, while the Fed remains concerned over inflation in the pipeline, Powell painted labor market weakness as a more immediate risk. In response, futures markets fully priced in a September cut..."

"July ended with a bang, with the final week so packed with macroeconomic data that the Federal Reserve meeting on 7/30 was almost an afterthought. The bad news is that very little of the week’s data was pretty. The good news is that data is at least telling a consistent story after a long period of uncertainty..."

"June was bookended with two labor reports that received very similar, and we believe incorrect, market reactions. Both May’s 139k (revised to 144k) and June’s 147k job gains were objectively weak releases, below the long-term trendline. But the markets treated both as strong due to beating even worse expectations (126k and 106k, respectively)..."

"There seems to be a “Groundhog Day” element to writing economic commentary lately. At the start of June, we are still concerned about tariff uncertainty, as well as the scope of federal layoffs, and unless you look at the details, it is entirely possible to miss the fact that another month has passed..."

"The whipsawing of President Trump’s trade war that intensified on April 2nd will have many unintended consequences. One will be that incoming economic data will be extremely hard to interpret for at least the next several months. Before discussing specific releases, we’d like to pause and think about the various ways we expect data to be distorted..."

"A common theme in recent client conversations is that the economic risks we currently see in the markets aren’t simply the size of announced tariffs or widespread federal layoffs per se. Rather, it’s the amount of uncertainty both have created and the impact it’s having on consumer and business behavior. The news cycle has been moving far faster than economic releases, but we are seeing the effects of these announcements..."

"While at the start of February, it was possible to tune out Washington and focus on fundamentals, by the beginning of March, that was no longer the case. There are a number of developing trends here we see as meaningful to investors..."

"While news coming out of Washington dominated the financial press in the second half of January, it shouldn’t entirely draw attention from the fact that, at the moment, we have a pretty good economic backdrop..."

"The incoming “Trump 2.0” Administration’s policy priorities remain in flux, and House Speaker Johnson’s near failure to be seated is a fresh reminder of the thin legislative path open to the GOP.  With so much still unknown, major market impacts are likely to come from public policy, but for now we will focus on hard economic data..."

"Even without an election, today’s macro environment would be interesting. Markets are focused on labor weakness and have broadly moved on from inflation concerns. What makes this fascinating , however, is that we think markets have it backward..."