Latest news with #Covidcrisis
CNBC
7 hours ago
- Business
- CNBC
Ron Insana says Trump's spending bill unlikely to generate the economic boom he promised
As he did in his first term as president, President Donald Trump is once again predicting an economic boom the likes of which the U.S. has never before seen. In reviewing the publicly available economic data since Ronald Reagan, the period in which the U.S. grew the fastest with the most job creation did not occur in Trump's first term and is unlikely to do so in this term, the reasons why to be explained shortly. First, a brief review of recent economic history where the biggest economic boom actually took place. Former President Bill Clinton's eight years in office produced nearly 4% annual growth, over 240,000 jobs added per month and an inflation rate that averaged less than 3%, considered very low for that time. The unemployment rate when Clinton first took office was 7.3% and bottomed at 3.8% by April 2000. By contrast, in Trump's first term, the economy added under 200,000 jobs per month, roughly equal to that of former President Barack Obama, while GDP growth averaged 2.3%, again, roughly equal to Obama's last three years in office, while inflation was less than a quarter percentage point lower than in Obama's second term. (Trump's numbers, of course, were skewed by the Covid crisis, which featured the steepest and shortest recession in U.S. history.) All that leads me to the notion that a boom, the likes of which we have not seen, is unlikely even if the "Big Beautiful Bill" passes through Congress and lands on Trump's desk. And here's why. Nothing new to help growth First, the bill largely extends existing tax rates that were put in place in 2017, without further lowering corporate taxes, as once promised, from 21% to 15%. There are no major additional tax cuts included in the bill. The bill simply makes much of the existing code permanent. No change, no gain. It's true that taxes on tips, overtime and Social Security payments may be eliminated, but that could also lead to employers seeking out ways, in the first two cases anyway, to pay lower wages if tips and overtime go untaxed. Beyond that, there's not much new in the bill that would accelerate economic growth, nor would a failure of the bill's passage lead to a 68% tax increase for everyone in America, as the president has warned . Published analyses have suggested that 68% of Americans could see a 7% increase in their taxes, but not a 68% increase in what they pay. Given the prospects for rising inflation amid recently imposed tariffs, and a subsequent slowing in consumer spending, some of which is already taking place, the economy appears to be downshifting rather than speeding up. Job growth , as we saw on Friday, has moderated for several months in a row and while not reflective of a recession, we're also witnessing a jump in jobless claims, announced layoffs and, according to some published reports, consumers maxing out credit cards to buy the basics. Add to that the reductions in support for the poorest Americans, whether its access to Medicaid or food stamps, and the ingredients for a further slowdown are embedded in the bill, especially for those who can least afford to have government assistance reduced in a meaningful way. Big changes needed The Department of Government Efficiency spending cuts are also affecting government stimulus in so far as key funding in technology, medicine and education are being slashed, threatening the very areas that make the U.S. economy competitive and very much growth-oriented. The bill, by most accounts, also adds from $2.4 trillion to $3.3 trillion to the budget deficit over the next decade. With the current national debt standing at a record $36.2 trillion, higher federal borrowing needs could further push up borrowing costs as investors, especially international ones, now nervous about America's fiscal position could demand higher yields to compensate them for the risk, however unlikely, that the U.S. runs into trouble in paying its bills. During the Clinton administration, tax rates were higher, and yet growth was stronger, 22.7 million jobs were added and the budget deficit turned to surplus by the end of his term. None of those metrics are supported by existing or proposed policy initiatives today. The Clinton boom was second only to that of FDR, whose economy grew strongly as Roosevelt took over, quite literally, at the very bottom of the Great Depression. In modern times, Clinton's economy was stronger than that of any president who came before or after him. None of the policies currently being pursued by this administration offer the same prospects for growth though, even like Clinton, this president has a major technological revolution underway. That big, beautiful bill would require some big, bountiful changes if it hopes to stimulate growth in a way in which all Americans, rather than perhaps a handful of billionaires, will share meaningfully in any future prosperity.
The Guardian
05-04-2025
- Business
- The Guardian
Thousands in Spain join nationwide march to protest against housing crisis
Tens of thousands of people have taken to the streets of Spain in the latest protest against housing speculation and to demand access to affordable homes. Organisers claim that up to 150,000 joined the protest in Madrid while smaller demonstrations were held in about 40 cities across the country. Protesters from Málaga on the Costa del Sol to Vigo in the Atlantic northwest chanted 'end the housing racket' and 'landlords are guilty, the government is responsible'. Valeria Racu, a spokesperson for the Madrid tenants' union, called for rent strikes such as those mounted recently in some Catalan coastal towns. 'This is the beginning of the end of the housing business,' Racu said. 'The beginning of a better society, without landlordism and this parasitical system that devours our salaries and our resources.' The union says 1.4m Spanish households spend more than 30% of their income on housing, 200,000 families more than 10 years ago. Housing has become the number one social issue in Spain as a combination of property speculation and tourist apartments have driven the cost of rented housing beyond the reach of all but the most wealthy. Official statistics suggest there are at least 15,000 illegal tourist apartments in Madrid while in Barcelona the city council says it will not renew the existing 10,000 tourist apartment licences when they expire in 2028. What was initially a problem in areas with a high concentration of tourists, such as the Balearic and Canary Islands, as well as Barcelona, has become an issue across the country, with protests in Seville, Valencia, Santiago de Compostela, Burgos and San Sebastián, among other cities, where protesters rattled sets of keys in what has become a symbol of discontent over the lack of affordable homes. In the Balearics the average rent for a small apartment has risen by 40% in five years to about €1,400 (£1,190) a month, more than the average monthly salary of those working in the hospitality sector, the region's main industry. The young have been hardest hit as housing costs have soared while salaries remain stagnant. A study published by the Spanish youth council showed that a lack of affordable housing meant that last year 85% of young people under 30 were still living with their parents. In Barcelona, where thousands gathered in the Plaça d'Espanya, protesters demanded a 50% reduction in rents, indefinite leases and an end to property speculation. According to the Catalan housing agency, rents in Barcelona have increased by 70% in the past 10 years. Salaries rose by 17.5% over the same period. 'The housing game is rigged in favour of anyone with assets while tax incentives encourage them to acquire more and more property,' said Jaime Palomera of the Barcelona Urban Research Institute and the author of El Secuestro de la Vivienda (The Kidnapping of the House). 'The rich have got richer since the financial crash in 2008 and the Covid crisis and they have used this wealth to buy more and more property, constantly driving up prices and increasing inequality. 'The fact is that property offers a better return than other investments. We have an economic model that encourages investment in assets that don't create any value but simply use rent as a way of sucking money out of the middle classes.' The solution, Palomera says, is to tax those who own multiple properties. He cites the example of Singapore, where the state offers financial support to first-time buyers but imposes an ascending tax regime on second and subsequent homes.
Bloomberg
06-03-2025
- Business
- Bloomberg
Commodities tend to outperform when equities go down
In our blog from a year ago, we highlighted how commodities tend to outperform in late cycle economic environments while other asset classes underperform. When other asset classes get pulled out with the tide, commodities can be an anchor in a portfolio by moving against in a risk-off scenario. Looking at the past six decades, exhibit 1 demonstrates the historical uncorrelated nature of commodities prices to other major asset classes found in typical portfolios. There were only a few instances since 1960 when commodities tended to have a higher than 0.4 correlation to equities (highlighted in light blue) – these episodes have occurred after big global shock events such as GFC and the Covid crisis. Most recently correlations have been moving toward zero across the major asset classes. Looking through a historical macro lens, there have been examples when the unique performance attributes of commodities really shine when equity markets fall or even move sideways. In 2025, there are plenty of reasons why a market participant may want to reduce an allocation to equities and diversify by adding or increasing an allocation to commodities, such as elevated stock valuations, impact from tariffs imposed by the US administration or sinking market sentiment. Commodities do not have the same drivers of performance as equities. Commodities do not have earnings estimates to beat or rely on what analysts think a stock price will do over the next 12 months. Commodities prices fluctuate based on the current point in time situation, already this year there are several themes – Tariff Effects and Peak Supply – playing out as was highlighted in our 2025 Outlook. A broad commodities benchmark like BCOMTR has had a strong start to the year verifying its role as a diversifier in a portfolio. If equities lose momentum this year, commodities could take the charge forward as deflationary momentum has stalled and could potentially reverse. Exhibit 2 shows how commodities and equities performed during the quarters when inflation rose the most over the past four decades. Only one quarter showed commodities had a negative performance, but this was in 2022 after commodities rose 25% the prior quarter. Looking back to the start of BCOM history in the 1960s, equities fell in 16 years and had an average drawdown of 14% while commodities averaged a positive 6% return over these same equity down years. Traditional diversifiers like fixed income have not behaved as expected since 2021 with correlations to equities over the last four years in positive territory for much of the time. This is a change from the typical negative correlations seen over the past century. Other diversifiers like private equity have gained in popularity and performed well but do not have the liquidity of commodities markets. Broadly, market participants are still under allocated to commodities, even though participation has been picking up. Simply going long commodities or tactically going long individual or sector commodity exposures has worked well recently, particularly for softs, precious metals, and livestock. Sophisticated market participants sometimes gain exposure through a long/short expression to take advantage of carry dynamics between different commodities. Shorting a commodity in steep contango like wheat or a precious metal could provide a pickup of at least 5% a year based on the current futures curves in Exhibit 3. The rise in gold prices challenges the traditional relationship between gold, USD and real rates. Strong central bank buying, futures positioning that has risen close to all-time highs, and big inflows of over $5 billion into physical backed gold ETFs over February 2024 have all helped push the price of gold to all-time highs despite the traditional fundamentals. If gold breaches the $3000 mark, at least a pause in price action could be warranted. Gold may continue its path higher if there is sustained safe-haven demand and cautious market sentiment. During uncertain times, diversification is a dear friend and uncorrelated assets such as commodities could be the diversifier market participants continue to consider when thinking about risks for 2025. The diverse nature of commodities sectors and individual commodities allows market participants to initiate long/short exposures based on specific drivers of performance differentiated within the broad commodities universe which provides opportunities for expression outside of a simple long-only exposure. If equities move into a bear market after recent multi-year outperformance, market participants could find opportunities with a diversifier in their portfolio like commodities.
