• Hello, summer

    Meeting in the middle  Democrats and Republicans have been going back and forth trying to find a middle ground for Biden’s original $2.3T proposed infrastructure plan. Republicans came back this week with a $928B plan, further narrowing the gap the Democrats’ latest $1.7T number. Biden wants to do this on a bipartisan basis, but it is possible to send this through reconciliation without Republican support.  Moral of the story: The biggest hurdle, imo, is that there isn’t clear alignment on what “infrastructure” means to both parties – while Biden’s trying to solve for everything from roads and bridges to healthcare, others view infrastructure as more of a “roads and bridges” kind of…

  • Inflation is still the name of the game

    Some signs of budging  Trying to figure out the upcoming actions of the Federal Reserve has been super topical recently because of the close (generally inverse) relationship between inflation and interest rates. So, when you’re worried about inflation increasing too much, you could increase interest rates to decrease inflation. The Fed has been pretty steadfast in its belief that the higher inflation coming through the remainder of this year is going to be transitory in nature (vs. a more permanent issue that needs to be addressed with a policy change like increasing interest rates). However, the latest meeting minutes indicated that if the economy continues to recover aggressively, there’s a chance that…

  • Inflation is the name of the game

    Inflation coming in hot  Consumer price inflation (CPI), which measure the cost of a basket of goods (including energy and housing) increased 4.2% in April compared to the year earlier. This is significantly higher than the 3.6% increase that was broadly expected and marks the largest jump in inflation in over 12 years. Excluding food and energy (which tend to be the most volatile components of CPI), core CPI still increased 3%, compared to the 2.3% increase expected.  Moral of the story: The Fed’s inflation target is 2%, so more than double that figure is a big number. We knew inflation numbers were going to be big, but the magnitude…

  • Weekly Digest: Good is bad, up is down

    The classic chicken and egg question  Given the promising employment data we’ve seen in the forms of weekly jobless claims reaching new pandemic lows, the market was expecting a really strong April employment report. In an unfortunate turn of events, we only created 266k new jobs in April, compared to the expectation of 1 million new jobs for the month. With this, the unemployment rate inched higher to 6.1%, instead of falling to the 5.8% expected by the market. The bad news continued as March’s initially reported 916k gain was revised downward to 770k.  Moral of the story: Despite the jobs report being so incredibly bad, markets didn’t really react…

  • 100 Days In…

    Growth underway  The resurgence of the US economy is well underway as US GDP grew 6.4% for the first quarter. With more vaccinations and another round of stimulus, consumer spending surged 10.7%. Also, ICYMI, the housing market is red hot, driving personal investments in housing up 11%. The optimism of reopening also helped businesses ramp up normalized spending as well and investments from businesses jumped up 10%. I’ve mentioned supply chain hiccups holding back industrial production, and we saw that flow through into inventory levels, which fell nearly $148b because production couldn’t keep up with demand. Had that not happened, GDP would have actually grown closer to 9%. All this demand is,…

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