Review and Outlook

"For some time now our view has been that the labor markets are somewhat stronger and progress lowering inflation is somewhat weaker than the market consensus holds. Nothing has fundamentally changed this view, but quite a lot happened in February that we think deserves attention..."

"Most of the interesting market news from January might be best described as changes to the market backdrop, rather than foreground action. While a lot of it may not have been immediately market moving, we believe some of these events will play out in important ways as the year goes on..."

"December’s FOMC meeting offered plenty for market participants to digest despite none of the main elements being surprising. For one, both the statement and Chairman Powell’s press conference made it clear the Fed now expects to be on hold for at least several months..."

"The federal government reopened on November 12th after the longest shutdown in American history. The resulting continuing resolution will only fund most of the government through January 30th, so a second shutdown is possible, maybe even probable. Until then, however, we will be wrestling with two concurrent problems..."

"October was largely a quiet macro month, thanks to the ongoing government shutdown, until the FOMC meeting ended the month with a bang. We thought Chairman Powell might cautiously open the door to a pause after October’s 25bps cut as we still see growing inflation pressures..."

"Backward-looking data is rarely market-moving, but what made September’s GDP revisions especially interesting is the way it called into question 2025’s prevailing narrative. While the headline growth rate of 3.8% alone would be noteworthy, the details are now significantly stronger..."

"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..."