Latest news with #JoeRennison
Observer
23-05-2025
- Business
- Observer
Bond market shudders as tax bill deepens deficit worries
Colby Smith and Joe Rennison The market for US government bonds, the bedrock of the global financial system, continued to shudder on Thursday, as President Donald Trump's bill to extend expensive tax cuts and create new ones without significantly slashing spending passed through the House of Representatives. The bill has unnerved investors, deepening worries that the country's debt is becoming unmanageable. Yields on US bonds, which underpin consumer and business interest rates around the world, from mortgages to corporate loans, have been rising in recent weeks. Yields rise as prices fall. Higher yields reflect investors' concerns that lending to the government by buying its debt has become more risky. The 30-year Treasury yield rose as high as 5.15 per cent in early trading, its highest since October 2023, before easing back later in the morning. The 30-year yield is trading about 0.7 percentage points higher than its low in April — a huge move in such a short time in that market. The lectern is prepared for a news conference at the Capitol in Washington on Thursday morning, May 22, 2025, after the House narrowly passed a wide-ranging bill to deliver President Donald Trumps domestic agenda. (Kenny Holston/The New York Times) Christopher J Waller, an influential governor at the Federal Reserve, said on Thursday that financial markets were looking for more 'fiscal discipline' from Washington, warning that investors are likely to continue to demand higher yields in order to hold US assets. 'We ran $2 trillion deficits the last few years — this is just not sustainable and so the markets are looking for a little more fiscal discipline,' he said in an interview with Fox Business. 'They're concerned.' Waller said that investors more broadly were shunning US assets and in turn demanding a 'premium' to buy. That so far has come in the form of rising yields on government bonds, indicating a drop in price. The Trump administration has denied that the latest bill will be detrimental to the country's financial standing, despite the United States' loss of its top-tier credit rating status last week. Russell Vought, who leads the Office of Management and Budget, said the decision by Moody's, which downgraded the nation's debt on Friday, was misguided and an attempt to 'sink the president's tax cut.' 'The notion that this was in any way harmful to debt and deficits is fundamentally untrue,' he said. But others on Capitol Hill disagree, citing the recent turbulence in the bond markets. Rep Chip Roy, R-Texas, acknowledged the 'issues in recent days' — after the downgrade — as a sign that the nation 'needs to have fiscal discipline.' Appearing on CNBC, he said the bond markets had actually been 'a little helpful,' as he and his fellow conservatives tried to push for even deeper spending cuts. 'And this bill, by the way, I've got to be honest, we took a step, but, man, we've got a long ways to go,' he added. The rising cost of borrowing has prompted American businesses to flock to European debt markets to raise new cash, taking advantage of the relatively lower interest rates on offer, according to a research report from Bank of America. 'There does seem to be a risk-off on American assets across the board, not just government debt, but everything,' Waller said. That aversion was last on full display when Trump announced his most aggressive set of tariffs in early April, which he was forced to walk back days later after traditional relationships in financial markets started to break down. As US stocks sold off, so did the dollar and government bonds, which typically act as safe havens. 'As long as the economy gets back on a good path — the economy starts growing, inflation stays down — you might see a resurge in demand for American assets,' Waller said. He reiterated that there was still a path for the Fed to lower interest rates this year, barring the return of significantly more onerous tariffs. 'If we can get the tariffs down closer to 10 per cent and then that's all sealed, done and delivered somewhere by July, then we're in good shape for the second half of the year,' he said of rate cuts. Investors warn that the fiscal package that eventually passes may end up keeping the Fed on hold for even longer because the measures will at least in the near term support the economy. Ajay Rajadhyaksha, global chair of research at Barclays, is still maintaining his call that the Fed will cut once in December, but said it was increasingly plausible that the central bank would opt to do nothing all year. Deficit hawks have warned for a long time about the risks of running large deficits, where the government spends more than it earns in taxes and other revenue. Those fears intensified after interest rates rose rapidly in 2022, making cheap debt taken on when interest rates were low suddenly a lot more expensive to maintain long-term. This year, the government will spend more than $1 trillion on interest payments on its debt, more than military spending and twice the government's interest cost five years ago. Investors had hoped that a Republican sweep of Congress, backed by a president who made cutting government spending a core message of his campaign, would provide the opportunity to meaningfully tackle the federal deficit. Given that backdrop, Thursday's passage of a bill that would extend tax cuts, introduce some new ones and add more than $3 trillion to the deficit — based on figures from the Congressional Budget Office — weighed on the market. The S&P 500 was roughly flat in early trading. The dollar rose against other major currencies, only partly reversing a three-day slide. Despite the uneasy mood across Wall Street, financial markets are still functioning smoothly. Officials at the central bank are unlikely to intervene unless that changes drastically, something Beth Hammack, president of the Cleveland Fed, made clear this week at the Atlanta Fed's conference on financial stability. She described the bar for the Fed to step in as 'incredibly high.' 'It needs to be a level of dysfunction where participants are unable to conduct business, banks are unable to lend credit,' she said in a moderated discussion. 'When we need to help support the financial markets is when there can be meaningful transmission into that real economy.' — The New York Times
Forbes
05-05-2025
- Business
- Forbes
Here's How To Handle A Recession If The Job Market Were To Plummet
Stock Market Graph next to a 1 dollar bill (showing former president Washington). Red trend line ... More indicates the stock market recession period Officially, an economic downturn is not a recession until there are two consecutive quarters of GDP shrinkage. We're halfway there. The American economy shrank in the first quarter of this year by 0.3%, the first contraction in 33 months. Further, we're one month into the second quarter, and although data is not compiled yet, would anyone like to lay a bet? Economic and job data orthodoxy says you don't make a statement like mine until it's official. Corporate executives don't want to destroy morale; government agencies must retain reserve; and those of us in the job market – coaches, recruiters, staffers, etc. – must not let pessimism creep in. But we all know what's in front of us; the trouble is, by the time this becomes official, we're already six months in and headed for more. This is typically where everyone's hindsight becomes so damned good. What we should be saying is:" It's not my fault but it is my problem." On the surface, April's Jobs Report seemed good – not great, but certainly better than expected: 177,000 jobs created and an unemployment rate unchanged at 4.2%. But a closer look reveals trouble ahead. Nearly half of those jobs occurred in just two sectors: health care (51,000) and transportation and warehousing (29,000). When we take into account the fact that Americans spend one out of every six dollars on health care and that there was a panic-like atmosphere in moving goods around before tariffs took hold, these job numbers are not so hot. And overall, job creation has slowed and is expected to continue slowing when we can accurately measure the losses initiated by DOGE but not yet tallied or challenged in court. I expect May's report, due out on June 6 (D-Day – how symbolic) will tell a much starker story. I hope not, but I've seen these signs before. The New York Times ran a piece by Joe Rennison heading up the Business section on May 1 entitled In the Trump Economy, Only Uncertainty Is Assured. The accompanying graphic by Alvaro Dominguez showed an incredibly jagged graph line which took a precipitous drop and ended up in Donald Trump's incredibly jagged signature. The graph line was red – a picture indeed worth a thousand words. In that light, as an independent career coach and job market observer, I've been insisting for more than two decades that in times of uncertainty, the only thing we can be certain of is ourselves. That means being prepared for something before it happens rather than reacting to it once it's happening or, worse, once it's over. Unquestionably, this is one of those times. Markets (jobs, stocks, bonds, futures) abhor uncertainty just as nature abhors a vacuum – and they dramatically showed it over the last few weeks. While we've seen a bit of a bounce back, this is not nearly over, and if I can't say so as an economist (which I'm not), I'm more than confident in my expectation as a job market observer (which I have been for 28 years). The advice I offer to my clients (7,000 and counting over 28 years) and to my readers (22 years) is that one step taken in advance is longer than 10 steps taken to catch up. In other words, don't wait another minute. Don't think it won't happen to you. Don't underestimate a thing. Don't expect things to work themselves out. The time for your next move is right now, no matter what your current situation is. General Douglas MacArthur said, 'The history of failure in war can almost always be summed up in two words: 'Too late.' Too late in comprehending the deadly purpose of a potential enemy. Too late in realizing the mortal danger. Too late in preparedness. Too late in uniting all possible forces for resistance.' It's not too late to see that our recession has begun. If I'm wrong, I'll say so, but right now, that's my story and I'm stickin' to it.
Forbes
03-05-2025
- Business
- Forbes
Don't Look Now. The Recession Has Begun. Job Market In Danger.
Stock Market Graph next to a 1 dollar bill (showing former president Washington). Red trend line ... More indicates the stock market recession period Officially, an economic downturn is not a recession until there are two consecutive quarters of GDP shrinkage. We're halfway there. The American economy shrank in the first quarter of this year by 0.3%, the first contraction in 33 months. Further, we're one month into the second quarter, and although data is not compiled yet, would anyone like to lay a bet? Economic and job data orthodoxy says you don't make a statement like mine until it's official. Corporate executives don't want to destroy morale; government agencies must retain reserve; and those of us in the job market – coaches, recruiters, staffers, etc. – must not let pessimism creep in. But we all know what's in front of us; the trouble is, by the time this becomes official, we're already six months in and headed for more. This is typically where everyone's hindsight becomes so but it is my problem'; and, of course, where politics sinks to its lowest level. The failure – or complete lack – of leadership is painful and costly to all. On the surface, April's Jobs Report seemed good – not great, but certainly better than expected: 177,000 jobs created and an unemployment rate unchanged at 4.2%. But a closer look reveals trouble ahead. Nearly half of those jobs occurred in just two sectors: health care (51,000) and transportation warehousing (29,000). When we take into account the fact that Americans spend one out of every six dollars on health care and that there was a panic-like atmosphere in moving goods around before tariffs took hold, these job numbers are not so hot. And overall, job creation has slowed and is expected to continue slowing when we can accuratg ely measure the losses initiated by DOGE but not yet tallied or challenged in court. I expect May's report, due out on June 6 (D-Day – how symbolic) will tell a much starker story. I hope not, but I've seen these signs before. The New York Times ran a piece by Joe Rennison heading up the Business section on May 1 entitled In the Trump Economy, Only Uncertainty Is Assured. The accompanying graphic by Alvaro Dominguez showed an incredibly jagged graph line which took a precipitous drop and ended up in Donald Trump's incredibly jagged signature. The graph line was red – a picture indeed worth a thousand words. In that light, as an independent career coach and job market observer, I've been insisting for more than two decades that in times of uncertainty, the only thing we can be certain of is ourselves. That means being prepared for something before it happens rather than reacting to it once it's happening or, worse, once it's over. Unquestionably, this is one of those times. Markets (jobs, stocks, bonds, futures) abhor uncertainty just as nature abhors a vacuum – and they dramatically showed it over the last few weeks. While we've seen a bit of a bounce back, this is not nearly over, and if I can't say so as an economist (which I'm not), I'm more than confident in my expectation as a job market observer (which I have been for 28 years). The advice I offer to my clients (7,000 and counting over 28 years) and to my readers (22 years) is that one step taken in advance is longer than 10 steps taken to catch up. In other words, don't wait another minute. Don't think it won't happen to you. Don't underestimate a thing. Don't expect things to work themselves out. The time for your next move is right now, no matter what your current situation is. General Douglas MacArthur said, 'The history of failure in war can almost always be summed up in two words: 'Too late.' Too late in comprehending the deadly purpose of a potential enemy. Too late in realizing the mortal danger. Too late in preparedness. Too late in uniting all possible forces for resistance.' It's not too late to see that our recession has begun. If I'm wrong, I'll say so, but right now, that's my story and I'm stickin' to it.
Ya Libnan
17-03-2025
- Business
- Ya Libnan
Trump is making foreign stocks Great Again
Top curve represents Hong Kong stock market performance + 20.20 % Center curve represents Europe stock markets +4.3% Lowest curve represents US stock markets -6% For years, the S&P 500 soared above the stock indexes of other countries. But since Trump's inauguration, it has fallen 6 percent and is now trailing major markets in Europe and China. By Joe Rennison President Trump has promised to create an age of American exceptionalism with policies that put the United States first, and ahead of other nations. But Mr. Trump's moves in the early days of his administration have had the opposite outcome for the American stock market. The S&P 500, which for years had been soaring above the stock indexes of other countries, is now trailing major markets in Europe and China, as investors have started to pull money from the United States and reallocate it around the world. Since Mr. Trump's inauguration, the S&P 500 has fallen 6 percent, while the Dax index in Germany has risen 10 percent and the Europe-wide Stoxx 600 index has gained more than 4 percent. Other U.S. indexes have fared even worse, as European markets have been buoyed by plans for military spending on the continent after Mr. Trump made it clear he wants those nations to do more to protect themselves. The Hang Seng Index in Hong Kong has soared further, rising more than 20 percent since Mr. Trump took office in January, driven by the Chinese government's efforts to stimulate its economy. Mexico's IPC index, which is domestically focused and proving resilient to Mr. Trump's steep tariffs, is 5 percent higher. With American markets being whipsawed by the uncertainties over Mr. Trump's tariff policies and deep cuts to the federal government, investment advisers have started steering clients to other stock markets around the world. 'It is definitely time to be looking at ex-U.S.,' said Jitania Kandhari, deputy chief investment officer of the solutions and multi-asset group at Morgan Stanley Investment Management. She said she had noticed an uptick in conversations with clients looking to increase their exposure to international stocks. Even global markets that have slumped have managed to outperform the S&P 500. The FTSE All-World index has dropped 2.9 percent since the inauguration, weighed down by U.S.-listed stocks. Canada's TSX index has dropped 2 percent. And the Japanese Nikkei 225 has fallen 3.6 percent. In recent weeks, Wall Street has sent out a raft of bank research notes, client presentations and trade ideas that recommend a pivot away from the United States. 'Respect resilience, fade U.S. exceptionalism, and worry about policy shocks,' read the title of one of those presentations from Bruce Kasman, chief economist and global head of economic research at J.P. Morgan. Brad Rutan, a market strategist at MFS Investment Management, said he also saw opportunities outside the United States. 'It's safe to say that there is plenty of room now for international equities.' Over the past week, investors pulled money from funds that buy U.S. stocks for the first time this year, according to weekly data that runs through Wednesday from EPFR Global. The withdrawal totaled a modest $2.5 billion, which compares with the roughly $100 billion inflow in the first nine weeks of 2025. While some traders are exceptionally quick to react to new information in the market, others, especially those that expect to be invested for a long time like pension funds or university endowments, can take months to move their money around. 'After such a protracted outperformance of the U.S. versus Europe, these things can't turn 180 degrees in a month,' said Greg Boutle, head of U.S. equity and derivative strategy at BNP Paribas. 'There are probably many investors that have not reallocated yet.' If investors continue to pull their money from U.S. stocks and invest in foreign markets, it could add to the selling pressure that last week dragged the S&P 500 into correction, defined as a fall of more than 10 percent from its peak. U.S. markets are so large that a complete exodus by foreign investors is near impossible, Ms. Kandhari said, 'but the shift can definitely create market moves.' The recent withdrawal comes after years when the U.S. stock market was the envy of the world, attracting foreign investors looking for higher returns than their home markets could provide. Roughly $420 trillion flowed into funds that buy U.S. stocks in 2024, according to data from EPFR Global, helping lift major indexes higher and contributing to the growth of a handful of big technology companies. Roughly two-thirds of the valuation of the FTSE All-World Index comes from U.S. stocks, with nine of the top 10 stocks in the index by size coming from the United States. In the year leading up to the presidential election, the S&P 500 outperformed many of the other indexes around the globe, rising 32 percent. The next best was Germany's Dax, up 27 percent. Many investors are still bullish on U.S. stocks over the long term and believe they will again outperform foreign stocks. Europe may be ramping up government spending, potentially spurring growth. But that boom could be driven by a fear of war, not because of sustainable economic strength. And if the United States enters an economic downturn, the rest of the world is unlikely to be spared from the fallout. 'I think eventually all of this uncertainty settles down and we will still be left with a U.S. that has advantages that Europe and other countries don't have,' said Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute. Other investors are wondering whether the current moment could be the beginning of an inflection point, upending the long-running trend of U.S. exceptionalism in financial markets. 'I think that discussion is happening,' Ms. Kandhari said. New York Times
