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: Make Or Break
It is said that hope is not an investing strategy. Neither is despair. There is nothing wrong with anticipating a good outcome–that’s what hope is. It’s only a problem is the facts don’t support the hope. A lot of sentiment surveys have pointed to higher hopes of what can come in 2025 in terms of deregulation and tax policy. We will find out soon enough whether those hopes get dashed against the rock of reality or if the facts support making the hope a reality.
Inflation: High But Not?
The most visible and recurring parts of consumer spending are still experiencing high inflation. The less visible and less frequent purchases are seeing disinflation (declining inflation) or even deflation (declines in prices, not just declines in inflation). Lower inflation can still feel too high, which is why the Fed’s job isn’t done and it’s not rushing to declare victory.
Policy: Past The Peak
For a while it looked like the market was throwing in the towel on future rate cuts by the Fed. After a somewhat decent inflation reading for December and soothing words from some Fed speakers, maybe we are past the peak of fear that the Fed may feel like they need to not just pause rate cuts, but actually hike. That has helped yields come lower. Now we just have to wait and see what kind of executive actions are taken and whether congress can coalesce around a tax and spending plan that reins in deficits. One thing about markets though, they do tend to climb a “wall of worry.” Often that wall is economic–where are we in the business cycle? Now it is more political than economic.
Looking ahead: Momentum’s Mojo
An object in motion tends to stay in motion until acted upon by an outside force. Surprises can serve as those outside forces. A pleasantly low inflation reading served as a surprise to push yields lower and stocks higher this past week. Looking ahead, the Inauguration and what Trump may or may not do within the first 100 days, if not the first 100 minutes, has been widely telegraphed and anticipated. Perhaps the clouds of policy changes on bonds and non-US stocks are going to part.
