Insights
U.S. Interest Rates Commentary and Research from Eric Hickman
This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell futures/securities. The material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives.
The Democrat to Republican first year curse
There is a lot of economic optimism for the new Trump administration, especially since it comes after four years of Democratic leadership. Reduced regulation and taxes are economically stimulative. Yet, four of the five times the presidential party has flipped from Democrat to Republican since…
With tariffs, remember demand
As signed into law on Saturday, deep and broad tariffs will begin on Tuesday for goods imported from China, Mexico, and Canada. Retaliatory tariffs have also been announced from Canada and Mexico. Trump’s primary motive is to generate revenue and I doubt they will go…
On today’s FOMC meeting
Today’s FOMC meeting was as I expected. On Monday, I wrote to my clients, There isn’t enough in the data for Powell to lean back dovishly at the FOMC meeting on Wednesday. 49 basis points of cutting are priced-in through the end of the year…
Consumer credit contracts
Consumer credit, released last Wednesday, contracted $7.5 billion in November. The series represents consumer loans excluding mortgages and totals $5.1 trillion. It is rare for it to decrease outside of recessions. A smaller amount of credit represents less consumer spending and “deleveraging” which weighs on…
The labor market isn’t stabilizing
The phrase of the day is “labor market stabilization.” After the payroll number beat expectations (256k versus 165k expected) and the unemployment rate dropped 0.1%, many analysts have declared that the labor market is stabilizing. But, given that the payroll number only improved 29k versus…
Economic data is changing and yields will soon follow
As everyone is thinking about what Trump’s administration means for inflation, the real story for interest rates is the economic data. Economic data rose immensely from August through mid-November bringing interest rates and a hawkish Fed narrative with it. The Lantern Daily Economic Index (LDEI)…
“Well, the data happened”
A telling interview from Mary Daly on Friday. Mary Daly, President of the San Francisco Fed District (nearly a quarter of U.S. GDP, 23.5%), was interviewed by Bloomberg on Friday. In it, she emphatically said that economic data was what changed her opinion since September,…
The Fed near the top of a wave
The Fed was hawkish today causing the 2-year to rise 13 basis points, but this tone and economic projections are entirely based on the “mini-boom” that’s occurred since August which is not durable. Powell made this distinction in an answer to a question about the…
LDEI Index Description
As many of you know, I have been working on an index this year, the Lantern Daily Economic Index, to show how economic data is evolving daily. I’ve long felt that economic data drives interest rates more than is appreciated and now I can prove…
Service-sector, Powell, and the Beige Book
Three important things today: service-sector ISM, an interview with Jerome Powell, and the Beige Book 1. The service sector PMI (purchasing manager’s index) from the Institute of Supply Management was released this morning, falling almost 4 points from its last reading to 52.1 from 56.0….