Wages Are Rising and The Phillips Curve is Not Dead

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The Phillips Curve (the relationship between wages and the unemployment rate) finally awoke from its slumber with today’s unemployment report showing private sector wages rising 2.9% year-over-year and non-supervisory wages rising 2.8% year-over-year, the fastest growth rate since 2009. Even more important than that, though, is that all indications continue to point to even faster […]

Thoughts on the Term Premium

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As many have documented, the main channel of transmission for the Fed’s quantitative easing policy was via the term premium component of US treasuries. As the Fed’s balance sheet doubled from 2010 to 2015, the term premium embedded in US treasuries fell from 2.5% to -75bps. The Fed is now shrinking its balance sheet, which […]

What We’re Reading

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Recently we were asked about the latest books and ideas contributing to our economic analysis. Here’s an incomplete list of what we’ve been reading this summer. Straight Talk on Trade: Ideas for a Sane World Economy  By Dani Rodrik A discussion of free trade and how nations can sensibly chart a path forward in today’s […]

Quarterly Strategy Update: What We Know, What We Think & What We Are Unsure Of

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Recently, fears of a slowdown in global growth brought on by a trade war have led to turbulence in cyclical assets. The US Dollar has risen while commodities and emerging markets have struggled. The Chinese Yuan has depreciated significantly, recalling fears of the 2014-2016 industrial recession. This quarter, we examine the outlook for economic growth […]

Yield Curve Inversion: Not What it Appears

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There has been considerable discussion lately about the slowly inverting yield curve and what it may signal for growth prospects going forward. Commonly used as a proxy for the yield curve is the spread between 10-Year US Treasury yields and 2-Year US Treasury yields. As of this writing, the spread is 24bps, having compressed by […]

The Inflation Story is Alive and Well in Five Charts

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In light of Fed Chairman Powell’s congressional testimony, we thought it relevant to revisit the inflation story and provide yet more evidence that the trend in inflation continues to be higher. For now, the Fed has assessed the risks to inflation and growth as balanced in both directions, which is Fed-speak for a policy that […]

EM Capitulation

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Yesterday, someone threw in the towel on EM bonds. The Van Eck JP Morgan Emerging Market Local Currency Debt ETF (EMLC) is the largest and most liquid vehicle to invest in emerging market local currency bonds. In one trade yesterday, someone pushed through a block of 18,841,690 shares, valued at around $320M. Interestingly, the price […]

Which is More Impactful to the US: Crude Oil or China Trade? Can Someone Tell Currency Traders?

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Talk of a trade war with China has recently dominated the discussion in financial markets, overshadowing the other major story playing out in the US economy—normalization of the energy markets. I thought I would answer the question of whether trade with China or oil was a bigger economic issue. Currently the US consumes about 20.4M […]