Daily Economic Update: January 26, 2024

In a big day of data, the U.S. GDP 4Q advance reading was well above consensus coming in at 3.3% vs. 2.0% est. while the GDP Price Index data was below estimates, showing signs of cooling inflation.  The GDP data of the last two quarters coupled with further signs of disinflation is continued fuel for the soft landing narrative.   Jobless claims were above 200K for what feels like the first time in a while. Durable Goods Orders and New Home Sales were also solid.  The ECB was on hold as expected with LaGarde trying to push back on rate cuts, while hitting on the fact that they are waiting to see wage growth stabilize or slow, but the continued weakness in soft data such as PMI's has markets continuing to price in fairly aggressive cuts.   Overall the S&P was up, EUR:USD was weaker as markets focus on U.S. growth and U.S. bonds closed lower and the 7Y auction was better than the ugly 5Y auction from Wednesday.   2Y ~4.30% and 10% ~4.12%

If you missed it the other night, the Fed ended the BTFP arb as they wind down the BTFP facility in March as well.  If you were unfamiliar with the arb, banks could borrow from the BTFP and deposit those funds with the Fed and earn IORB, in other words you could borrow from the Fed and earn a positive spread on those funds from the Fed.  

In geopolitics, headlines indicate that Putin might be open to talks on Ukraine.  On the day ahead it's PCE as the main course.

XTOD: Q4 GDP:  3.3% vs 2.0% exp.   The best GDP report a half a trillion dollar deficit in one quarter can buy!

XTOD: The airport is nowhere in sight. H4L baby.

XTOD: the 'strengths of monetary policy transmission' is code for 'who knows?'.

XTOD: I dread disagreeing w/ Claudia, but the fact that there has been a soft landing does not itself mean the inflation was transitory.  A soft landing was possible, w/ the help of Fed rate hikes, even if it was partly due to excess AD growth. Indeed, the belief that there can’t be a soft-landing from a situation of unwanted demand-driven (hence, non self-reversing) inflation itself reflects Philips-Curve thinking. 

(I’m going to go put my suit of armor on now.)

XTOD: I've put together a list of 5 key areas to watch this year. Yes, volatility can surprise businesses and financial markets any year. What makes 2024 different is the exponential impact volatility could have in the economy. I hope you'll give them a read. https://www.linkedin.com/pulse/five-flashpoints-2024-nomi-prins-a9gce/

XTOD: Let's not forget: The inflation was premeditated & intentionally created by the central planners, as they implemented the Blackrock plan to cause inflation via my QE2 proposal that I designed for a deflationary shrinking economy -when supply was restricted https://t.co/PCzsDTf2Mv

XTOD: The best way to gauge the quality of someone’s ideas isn’t to listen to them talking. It’s to read their writing.  Compelling speakers can mask weak logic with strong charisma. Putting key points on a page exposes flawed reasoning.  Compelling writing requires clear thinking.

XTOD: Surprising new data on religious affiliation and the rise of None:  

None 28%

Evangelical Protestants 24%.

Catholics 23% 

In 2007, "None" made up just 16% of Americans

https://x.com/Geiger_Capital/status/1750513547082108998?s=20
https://x.com/dampedspring/status/1750512784628969747?s=20

https://x.com/DanielaGabor/status/1750516355420282897?s=20

https://x.com/GeorgeSelgin/status/1750548825498898716?s=20

https://x.com/AdamMGrant/status/1750545746066043206?s=20

https://x.com/Ritholtz/status/1750570476735254688?s=20