Outlook for the US Economy

The US equity and bond markets are telling completely different stories about the outlook for the country’s economy. In the first seven months of 2019, the S&P 500 index rose by 10.2 per cent, suggesting firms could continue producing strong corporate earnings off the back of decent economic growth. Over the same time period, borrowing costs on 10-year Treasuries fell from 2.68 per cent to 1.89 per cent, sign-posting lower rates and inflation, and the likelihood of recession ahead. This economic recovery in the United States is the longest on record, and analysts are on the lookout for signs it is ending. Who has it right—equity or bond investors?

Here’s my overview for the US economy in Prospect Magazine: https://bit.ly/2OJbSZJ

Trade tensions are strangling American manufacturing

The US manufacturing sector has now contracted for two consecutive quarters, according to the Federal Reserve, raising concerns a general recession is drawing near. But those fears remind me of a triathlon I recently completed. With burning lungs and a pounding heart, I’d really flagged during the swimming section. Then I recovered and finished fine. So does a limping manufacturing sector really mean the American expansion will end? https://www.ft.com/content/9382e6a8-b2b2-11e9-b2c2-1e116952691a

Fed rate cuts won’t help

Everyone has been obsessed with whether the Fed will cut rates and by how much, but the much more important question is: what’s the point? I argue that Fed rate cuts won’t help much: https://www.ft.com/content/b5f4f972-9342-11e9-8ff4-699df1c62544.

For a shorter version of this argument, see my CNBC debate on the topic with Steve Liesman and Kelly Evans. https://www.cnbc.com/video/2019/07/22/heres-why-this-economist-thinks-a-rate-cut-might-be-pointless.html