With major central bank decisions in the rearview, markets can shift their focus to the impending government shutdown and ramifications of the ongoing UAW strike. Speaking of strikes, the Hollywood writers appear to reach a deal with studios, while actors remain on the sidelines.
Friday's Fedspeak seemed hawkish to me, with Governor Bowman stating: "inflation is still too high, and I expect it will likely be appropriate for the Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal in a timely way." We'll get plenty of Fedspeak this week as well.
The 2Y is 5.12% the 10Y is 4.50% to start the week and stocks will look to try to come back following losses not seen since March.
Probably the biggest item this week is GDP as well as the BEA's revisions to the National Economic Accounts, some of the revisions will go back to 2013 and will include some new PCE metrics.
In China news, more issues in the property sector, which at this stage just seem like recycled headlines.
On the week ahead:
Today: Dallas Fed Mfg Index, Fedspeak
Tue: Home price data, consumer confidence, new home sales, 2Y note auction, more Fedspeak
Wed: Durable goods, 3Y note auction
Thur: Final look at 2Q GDP, jobless claims and pending home sales, 7Y auction,more Fedspeak, including Powell at 4pm
Fri: PCE and spending data, UofM survey of consumers
Tue: Home price data, consumer confidence, new home sales, 2Y note auction, more Fedspeak
Wed: Durable goods, 3Y note auction
Thur: Final look at 2Q GDP, jobless claims and pending home sales, 7Y auction,more Fedspeak, including Powell at 4pm
Fri: PCE and spending data, UofM survey of consumers
XTOD: Concert tickets are hard enough to get, you shouldn’t have to pay surprise service fees on top of that. My Administration is working to crack down on those junk fees, so you know what you are paying for up front.
XTOD: Good luck getting your car repaired: Auto worker strikes now expanding to *38* parts and distribution locations across 20 states. This feels like a movie.
XTOD: This research dovetails with other research that ultralow rates in wake of global financial crisis benefited largest firms, which invested and got so far ahead of small & midsized firms they became in author’s words lazy monopsonies.
Problem. The reverse of QE with current reductions in Federal Reserve’s balance sheet and increased volatility in the Treasury bond market does not mean we stop crowding out other investment. Could very well see the more crowding out due to fiscal situation and political brinkmanship. Dumpster fire.
XTOD (side note if their track record is like the Fed's economist, you might see this as a sign to short Amazon): "Amazon has hired more than 150 PhD economists, making it the largest employer in the field behind the Federal Reserve...according to...Amazon itself, integrating economists has been critical to the company’s phenomenal growth in e-commerce."
XTOD: JPMorgan’s estimates for what’s driven the Treasury selloff: overwhelmingly, the improving growth outlook and a reassessment of the long term interest rate outlook.
XTOD: What cannot be overlooked is that when you are speaking Portuguese ala 2013-16, you should expect a weak growth->no growth->negative growth environment in real terms, but hot positive nominal growth (like Brazil cycling 8% nominal GDP with 12% inflation)……and yet the screwy part is that real rates on govt debt blow out anyway *across the curve* … this is the market’s natural way of pushing back on Fiscal Dominance… it’s a primary defense mechanism.....then you should consider that maybe instead of “bonds are a no-brainer, just look at all that premium,” you should think of it as the bond market’s Lorena Bobbitt reaction moment to persistent abuse, and the beginning of a bigger pushback against Fiscal Dominance....Markets stop panicking when politicians start panicking. I think the bond market is about to send a very loud, panicky message to DC that fiscal incontinence has consequences that don’t need to be dressed up in fancy arcana like “R*” and “expectations.”
XTOD: Almost all fiscal rules are silly. Governments can't bind themselves and historically have struggled to when they tried. Part of the reason is that it's too tempting to break them. Part of the reason it's too tempting is that at some point they become a bad policy. Some exceptions are: don't try to finance government expenditure to any significant degree with seigniorage. The consequences of wildly disregarding that are so bad that we managed to encode that in laws, even constitutions, and stick to it.
XTOD: Good luck getting your car repaired: Auto worker strikes now expanding to *38* parts and distribution locations across 20 states. This feels like a movie.
XTOD: This research dovetails with other research that ultralow rates in wake of global financial crisis benefited largest firms, which invested and got so far ahead of small & midsized firms they became in author’s words lazy monopsonies.
Problem. The reverse of QE with current reductions in Federal Reserve’s balance sheet and increased volatility in the Treasury bond market does not mean we stop crowding out other investment. Could very well see the more crowding out due to fiscal situation and political brinkmanship. Dumpster fire.
XTOD (side note if their track record is like the Fed's economist, you might see this as a sign to short Amazon): "Amazon has hired more than 150 PhD economists, making it the largest employer in the field behind the Federal Reserve...according to...Amazon itself, integrating economists has been critical to the company’s phenomenal growth in e-commerce."
XTOD: JPMorgan’s estimates for what’s driven the Treasury selloff: overwhelmingly, the improving growth outlook and a reassessment of the long term interest rate outlook.
XTOD: What cannot be overlooked is that when you are speaking Portuguese ala 2013-16, you should expect a weak growth->no growth->negative growth environment in real terms, but hot positive nominal growth (like Brazil cycling 8% nominal GDP with 12% inflation)……and yet the screwy part is that real rates on govt debt blow out anyway *across the curve* … this is the market’s natural way of pushing back on Fiscal Dominance… it’s a primary defense mechanism.....then you should consider that maybe instead of “bonds are a no-brainer, just look at all that premium,” you should think of it as the bond market’s Lorena Bobbitt reaction moment to persistent abuse, and the beginning of a bigger pushback against Fiscal Dominance....Markets stop panicking when politicians start panicking. I think the bond market is about to send a very loud, panicky message to DC that fiscal incontinence has consequences that don’t need to be dressed up in fancy arcana like “R*” and “expectations.”
XTOD: Almost all fiscal rules are silly. Governments can't bind themselves and historically have struggled to when they tried. Part of the reason is that it's too tempting to break them. Part of the reason it's too tempting is that at some point they become a bad policy. Some exceptions are: don't try to finance government expenditure to any significant degree with seigniorage. The consequences of wildly disregarding that are so bad that we managed to encode that in laws, even constitutions, and stick to it.
https://x.com/POTUS/status/1705743782048645350?s=20
https://x.com/GuyDealership/status/1705403122972041350?s=20
https://x.com/DianeSwonk/status/1705659298741633063?s=20
https://x.com/KwekuOA/status/1705620544391917881?s=20
https://x.com/RobinWigg/status/1705469182412804420?s=20
https://x.com/PauloMacro/status/1704707840101781731?s=20
https://x.com/t0nyyates/status/1705190310194639245?s=20
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