Top of the afternoon to you. I hope you are having a wonderful Mothers Day! I promise this won’t take (too)long.
I’ve gotten a few moments to cobble together THIS LINKthru to a handful of curated observations from some of Global Wall Streets finest. In IT you’ll note an employment growth ‘chart of interest’ from EPB Macro (recession risk rising BUT …)
Along with these observations from the sellside and Global Wall Streets inbox, here are a few other links thru to things I’m going to try and read ahead of this evenings open …
Late FRIDAY, following NFP we got some Consumer Credit data — here’s ZH spin,
…Here are the shocking numbers: in March, one month after the February print already came in more than double the $18 billion expected, consumer credit exploded to an absolutely blowout $52.435 billion, again more than double the expected $25 billion print, and the highest on record!
... the real stunner was revolving, or credit card debt, which more than doubled from the already elevated February print of $14.2 billion to a stunning $31.4 billion, the highest print on record... just in time for those credit card APR to starting moving higher, first slowly and then very fast.
While this unprecedented rush to buy everything on credit at a time when there were no notable Hallmark holidays should not come as much of a surprise, after all we have repeatedly shown that for the middle class any "excess savings" are now gone, long gone...
Fiscal policy reduced U.S. GDP growth by 3 percentage points at an annual rate in the first quarter of 2022, the Hutchins Center Fiscal Impact Measure (FIM) shows. The FIM translates changes in taxes and spending at federal, state, and local levels into changes in aggregate demand, illustrating the effect of fiscal policy on real GDP growth. GDP fell at an annual rate of 1.4% in the first quarter, according to the government’s latest estimate.
The fiscal drag on economic growth in the first quarter was driven largely by the waning effects on GDP of federal transfer payments like the unemployment insurance benefit expansions and pandemic-related subsidies to business, which lowered growth by 1.7 percentage points. Dragged down by strong inflationary pressures, real federal, state, and local purchases also declined, lowering growth by 0.85 percentage point.
As the FIM shows, fiscal policy provided significant support to economic growth when large swaths of the economy were shut down in 2020 during the COVID-19 pandemic. The FIM turned negative in the second quarter of 2021 as fiscal support waned, and we expect it to remain so through the end of our projection period (the first quarter of 2024). The projection reflects the effects of recently enacted legislation, including the bipartisan infrastructure bill enacted last year and the Fiscal Year 2022 Omnibus Appropriations bill passed in March 2022, but does not assume enactment of any pending proposals.
CHARTS:
1stBOS FI tactical outlook / update — remain tactically BEARISH 5s, 10s and 30s and then, Friday happened when it appears they have COVERED SHORT 30s — put some hay in the barn, noting
… 30yr US Bond Yields have surged above our medium-term objective at 3.135% after the curve unexpectedly steepened.
… Short-term Strategy: Our successful tactically bearish bias from resistance at 2.865% reached support at 3.135% yesterday, where we turned tactically neutral. From here, we would turn tactically bearish again at resistance at 2.99%, with scope for a move to support at 3.35%, where we would turn tactically neutral again. Resistance below 3.00% is seen at 2.82%.
KIMBLE: Tech Breaks Support Here, Bear Market Picks Up Speed
… If I was put in charge at the Fed (which I thankfully am NOT), I would immediately reverse course on QT plans, since it has never worked out well. Just leave those assets in place, and replace them on the balance sheet as they mature. This would also mitigate the interest rate expense problem of the federal government, since the Fed returns the “profits” from those holdings to the Treasury.
And then I’d move the Fed Funds target rate up to match the 2-year T-Note yield.
Fed rate-hiking cycles end when the Fed Funds target rate is finally allowed to meet where the 2-year T-Note yield has already gone. Putting that off just means that the misery lasts longer. When the Fed Funds rate is below the 2-year, it fuels economic bubbles. When it is above the 2-year, it fuels recessions.
In an ideal scenario, we would just get rid of the FOMC, and outsource interest rate policy to the 2-year T-Note yield. That would save a lot on travel costs for the FOMC members, and it would arguably get us a much better result.
Kenneth Rogoff: The Fed Does Not Deserve All the Inflation Blame The US Federal Reserve certainly bears its share of responsibility for the great inflation of the 2020s. But powerful political pressures from the left and overly-optimistic analyses of open-ended debt policy, not to mention genuine uncertainties about inflation and real interest rates, also played a very large role.
… In closing a couple economic calendars and links for any / all still attempting to trade funDUHmental information flows … First, this from the best in the strategy biz is a LINKthru TO this calendar,
Glad to see the sellside observation back!