Insights
U.S. Interest Rates Commentary and Research from Eric Hickman
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Jerome Powell remains neutral for now
In a short speech and Q&A at the Chicago Booth School of Business today, Jerome Powell provided the next-to-last word (Adriana Kugler, Governor, also gave a speech in Portugal just after this) we will hear from the Fed until the upcoming FOMC meeting, a week…
Beige Book shows new weakness
While the Beige Book is about anecdotal information, how it is summarized becomes a piece of economic data in itself. Combining the assessments of whether each of the twelve districts economic activity was up, flat, or down, with my work on how much each district…
Bullish on the 2-year
I have been reticent about the 2-year yield dropping much surrounding the trade war because I wasn’t sure how the Fed would approach its higher inflation. Three things happened yesterday to bring me around to joining the rally (yields lower) in the 2-year. First, North…
Special Report: 1990 Holds an Important Lesson for Now
The approach into the 1990 recession was remarkably similar to now with no obvious recession imbalances or theme, a recession head fake with preventative Fed cutting, an ensuing economic mini-boom, large deficits, and finally an inflationary shock. [PDF]
Five in a row
Over the last year and a half, I’ve predicted (and defended) the five major inflection points in Treasury yields. Until January of last year, I had never tried to make calls with this level of precision. I previously thought the primary trend (business-cycle) was the…
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…