Macro & Market Musings are weekly insights on Growth, Inflation, Policy and Looking Ahead from Annex Wealth Management’s Chief Economist, Brian Jacobsen. Brian, a frequent contributor on CNBC and Fox Business News, hosts regular updates on the economy and markets. Check our events page for Brian’s next live event.

Growth: Defying gravity

Retail sales showed unexpected strength. Labor strikes and hurricane disruptions dinged manufacturing output. The economy keeps rising against forces that would normally hold it back.

Inflation: Coming back down to earth

Import prices are down 0.1% year-over-year, with export prices falling even further at 2.1% y/y. Meanwhile, inflation rates in the Eurozone, UK, and Canada are all hovering around 1.7% or lower. Despite past fears, inflation seems to be coming back down to earth, defying expectations of persistent pressure.

Policy: A good problem to have

Resilient growth means the Fed doesn’t have to move fast, but easing inflation means that it can. That’s a good position to be in. Rates are still above neutral, so the Fed has the room to cut without it creating stimulus. Most developed market central banks are cutting rates, so if the Fed doesn’t follow suit, the dollar could strengthen more and growth could go from resilient to restrained.

Looking ahead: A balancing act

As we look ahead, it’s important to enjoy the gains we’ve had while recognizing that the market is always in a tug of war between the optimists and the pessimists. Elections may loom large, but politics shouldn’t drive portfolio decisions. Earnings season is off to a good start, but expectations for growth might be a bit too high. Markets can shift quickly, so staying grounded with a long-term view and balanced approach to building a portfolio can help ride the waves of the markets.