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: Beige flag
The economy’s beige flag has been the disconnect between the “soft” data and the “hard” data. Given the error terms and revisions in the hard data, like GDP, it’s hard to call “hard” data hard. Soft data are from surveys, like the Beige Book. The Beige Book continues to paint a beige hued picture while payrolls and spending data are much rosier. The truth is probably in between where the economy is more lukewarm than red hot or ice cold.
Inflation: Gone but not forgotten
We can’t say rest in peace to inflation since it’s always there in the background, but most developed countries and regions are bidding adieu to inflation. The worries will linger and those worries will likely keep yields more volatile than they otherwise might be. While the Bank of Canada can cut confidently by 50 bps and the European Central Bank can cut consistently by 25 bps, the Fed is probably going to cut more cautiously.
Policy: Compromising to replace campaigning
Usually I write about monetary policy, but with the election coming up quickly investors seem more interested in why the candidates don’t seem to care about the deficit. You don’t win a campaign by promising discipline or frugality. You win by promising giveaways. Promises on the campaign trail are not contractual obligations. We will have to wait to see what types of compromises will be struck, but the long national nightmare that is campaigning season is almost over.
Looking ahead: Curb your enthusiasm and despair
It’s said that hope is not an investing strategy. Neither is despair. Hope is anticipation of a positive outcome. Despair is anticipation of a negative outcome. Often, things are not as good as we hoped, but also not as bad as we feared. That’s especially important to remember as we approach an election that many view as some sort of existential threat. We’ve seen split government, unified government, delayed results, and contested elections. Over time, corporate America has a knack for making money not matter what. That won’t change.
Brian Jacobsen, PhD, JD, CFA®, CFP®, CAIA, CBE
Dr. Jacobsen is Annex Wealth Management’s Chief Economist.
