Latest news with #RipVanWinkle
Mint
2 days ago
- Business
- Mint
Stocks are flying, the Dollar is falling, tariffs haven't hit yet. Why cut rates now?
As 2025 nears its halfway point, a latter-day Rip Van Winkle who might have been napping since the start of the year might think not much had changed. The S&P 500 index, while closing at a new high on Friday, was up an unremarkable 5%. That, of course, obscures the dramatic swings in between, with a near bear-market 19% decline from February to the lows after the Trump administration's April 2 Liberation Day tariff announcements. Then came an equally dramatic rebound following a pause in tariffs and a retreat from triple-digit levies threatened for China. But mainly, the first half gave rise to the investment meme of 'Nothing ever happens," insofar as the stock market is concerned. Trade wars and the uncertain impact of tariffs on the economy; fiscal fights over the Big, Beautiful tax bill that resulted in the U.S. losing its last triple-A credit rating; and conflicts in the Middle East, including the U.S. bombing of Iranian nuclear sites on June 22. After all of that, the S&P 500 and the Nasdaq Composite are ending the first half at record highs. Forget about the proverbial 'wall of worry" that bull markets supposedly ascend. The new belief, 'Nothing ever happens," is actually relevant to stocks and helped induce individual investors to buy the steep dip in April and May, putting a lie to all the hand-wringing. By halftime, the mood had swung back to FOMO, or fear of missing out. What hasn't changed is the Federal Reserve's policy stance. And yet, despite an ebullient equity market, an accommodative credit market, and a sharply lower dollar—all signs of easy financial conditions—the president has harangued Fed Chair Jerome Powell for failing to slash its federal-funds target range, which has been held at 4.25% to 4.5% since December. In congressional testimony this past week, Powell reiterated uncertainty about the effect on prices from tariffs, which mostly haven't hit yet. As EY-Parthenon Chief Economist Gregory Daco explains, their impact has been blunted by the front-loading of imports before the levies hit; use of bonded warehouses and foreign trade zones, which can delay tariff payments until goods enter the U.S.; temporary cost absorption by importers; lags in measuring tariff pass-throughs; and absorption of costs by exporters. Goldman Sachs economists expect just a one-time inflation boost from tariffs, raising the year-over-year core personal consumption expenditure index (excluding food and energy) to 3.4% in December, significantly higher than the 2.7% increase in the latest 12 months for the Fed's preferred inflation gauge reported on Friday. Brean Capital economic advisors John Ryding and Conrad DeQuadros note that the most recent CFO survey, conducted by Duke University and the Richmond and Atlanta Feds, found 41% planned to hike prices while 30% said they would absorb tariff cost increases in the next year. Goldman's inflation forecast is well above the Fed's 2% target, making it difficult to justify cutting rates now. Yet two Fed governors, Christopher Waller and Michelle Bowman, have said they would consider rate cuts if inflation is stable. The fed-funds futures market is pricing in two cuts of a one-quarter percentage point each by year end, with a 74.8% probability of the first move in September, according to the CME FedWatch site. Given the uncertain course of tariffs and their inflation impact, the more likely spur for a rate cut would be a deterioration in the labor market. That will put the monthly jobs data to be released in the coming, holiday-shortened week in the markets' focus. The consensus guess among economists is for a 125,000 rise in nonfarm payrolls in June, down slightly from May's 139,000 increase, with the headline unemployment rate continuing to hold steady at 4.2%. Deutsche Bank economists estimate it may take only a monthly payroll increase of 100,000 to keep the jobless rate steady, below the average gain of 124,000 in the first five months of the year, because of slower labor force growth. With no net immigration flows, only a monthly payroll rise of 60,000 would keep the unemployment rate flat. With deportations, just 40,000 payroll gains would be at break-even. Given the surge in retirements by baby boomers, RBC Capital Markets Senior U.S. Economist Michael Reid writes that the U.S. needs more workers rather than more jobs. While the labor-force participation rate is historically low at 62.4%, for the prime working age cohort it's near a record high of 83%. Retirees, meanwhile, provide a spending tailwind out of their savings and accumulated wealth. At record highs, the stock market provides support for these spenders, along with interest income that had been lacking during the zero-rate era. At the same time, credit markets attest to the financial strength of the corporate sector, writes John E. Silvia, the former chief economist at Wells Fargo. Along with tight corporate bond spreads, the S&P 500's record close indicates easy financial conditions. In particular, new highs in banks and financials point in the same direction. The one big change since the beginning of the year has been the dollar, which has declined by a sharp 10%, yet another easing in overall financial conditions. All of which makes calls for Fed rate cuts puzzling. Write to Randall W. Forsyth at
Time of India
12-05-2025
- Business
- Time of India
Trumpocalypse: The four horsemen of trade disruption
An investing Rip Van Winkle who went to sleep on April 1 and woke up now, would not realise the world had seen the biggest shock to global trade since WW2. Equity markets, including in the US, have recovered losses incurred in the week after April 2 - Trump's 'Liberation Day'. US bond markets, which also initially struggled to cope with the spike in uncertainty, have stabilised, too. #Operation Sindoor The damage done at Pak bases as India strikes to avenge Pahalgam Why Pakistan pleaded to end hostilities Kashmir's Pahalgam sparks Karachi's nightmare This rebound has occurred even as it's becoming evident that there was a sharp fall in US-China trade through April, a visible increase in US retail prices, and early signs of a global slowdown. Markets appear to be extrapolating the progressive US pullback from disruptive policies - first the 90-day pause on tariffs in response to bond market turbulence, and then the about-turn on China: from a combative escalation of tariffs, to a willingness to negotiate, apparently after US retailers warned of empty shelves in two months, culminating in a reduction in duties on China to 30% (from 145%) for 90 days on Sunday. Some now doubt the strength of the US resolve to withstand economic pain . Can the risk of 'fewer dolls this Christmas' force US import duties down to pre-April levels? That would be going too far. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Even if a 'grand strategy' is lacking, and daily announcements seem chaotic - like a proposed 100% tariff on movies made outside the US - Trump 2.0's actions and interviews of POTUS and his senior cabinet colleagues point to 4 underlying 'grand objectives': Political Live Events Despite a near-doubling of per-capita GDP in the last four decades (in real terms), median real wage has barely grown. This means that nearly half of the US population has not seen much improvement in their quality of life despite the US GDP growing 2.6x in real terms and 6.4x in nominal terms. While life expectancy of a White male American who's a graduate has risen to 84 years, that of the average White male American has fallen back to 73-74 of several decades ago. We can debate whether a revival of US manufacturing is the best solution for this problem. But the political forces unleashed are real, and Trump 2.0 draws its support from this base. National security If an economy with per-capita GDP exceeding $85,000 wanting to make penicillin and steel was not enough, the use of FDR's phrase 'arsenal of democracy' by a key Trump adviser to justify 25% tariffs on autos dispelled any remaining doubts. In a 1940 speech, FDR promised military supplies to Britain to fight Nazi Germany, using the 'arsenal of democracy' - effectively, among other things, making a 1,000x jump in production of fighter aircraft. The claim, inviting much derision initially, became reality in 1943. Given China's ascendance, the US may be replenishing capabilities for a hot war, even if only as a deterrent. International monetary reorder The country behind the global reserve currency must run a current-account deficit (CAD). Only then can foreign entities accumulate assets in the dollar. Over several decades of running a CAD, accumulated deficits become so large that the currency may become unsafe to hold. In December 2024, the US owed the world $62 tn, and owned only $34 tn foreign assets, resulting in a negative net international investment position (NIIP) of $28 tn, 90% of its GDP. Such resets have occurred in the past. Current real-effective-exchange rate (REER) of the dollar is at high levels last seen in 1971 and 1985, following which it had fallen in value by 30-35% over 3-8 years. A deliberate devaluation of the dollar is effectively a default and, thus, needs negotiation. That most of the US' international liabilities are with its allies - Europe, North Asia (Japan, Taiwan, South Korea) and West Asia - is perhaps why even allies were subjected to reciprocal tariffs. If their currencies appreciate against the dollar, US' NIIP would be less negative, as foreign assets get marked up in dollars. The recent sharp appreciation in the Taiwanese dollar shows some allies may already be adjusting. Revenue-building A somewhat minor objective is to earn fiscal revenue from import duties and use it to finance tax cuts Trump 2.0 promised during the election campaign. It's important to remember these objectives, as the contentious process of trade negotiations unravels. Is it possible that we are finding grand objectives where there are none? That there is no method underlying the madness? Absence of a clear approach isn't surprising. At turning points like these, and for large and complex problems, the regime knows what does not work, even if it does not know what will. For example, while the 1971 and 1985 devaluations involved mostly the Japanese yen and Deutsche mark, no solution would be possible today without China. Trump 2.0 appears to be calibrating the pace of change, using financial markets as leading indicators to minimise unintended consequences. Major objectives being non-economic in nature, some short-term economic pain is likely unavoidable. Further, it may be many months, if not years, before contours of the new system begin to emerge. Prolonged period of economic uncertainty itself is likely to be a headwind to global growth.
Telegraph
02-03-2025
- Telegraph
Why the Empire State is America's most underappreciated ski destination
Outside, the winter sky dazzles, not with stars, but with high-rises lit up like fireworks. On the broad streets, where hip-hop blasts, thousands of icy-eyed, caffeinated commuters surge from taxi cabs and the subway. In a streetside dive bar posing as an Eighties underground porn shop, neon lips and slogans – 'talk dirty' and 'sexy time' – cling on, while beneath them a huddled group is dressed not for clubbing, but for après-ski. The look isn't sequin outfits, miniskirts or party shirts, but puffer jackets, patchwork knits and bobble hats. It's one thing to spend the night before a bluebird powder day getting groggy on glühwein in a chalet. It's another entirely to revel in the seedy splendour of a Manhattan speakeasy somewhere between Times Square and Broadway. But this is the temptation of a transatlantic ski trip to New York, as, believe it or not, this is a state with more ski resorts than any other in North America – and investment is ramping up like almost nowhere else. Even if the Eighties vibes of a basement bar is not your bag for après-ski, it's hard to deny the absurd appeal of the Empire State in winter. Consider 50-plus pick-and-mix resorts, the timeless Catskill and Adirondack mountains within easy reach, a sense that something unknown but wonderful is about to happen. The post-New Year winter low season, unlike in Europe, is also splendidly charitable and an affordable time to visit the Big Apple, with hotel and restaurant prices slashed after the Christmas rush. At the drop of a dollar, you can drink martinis, stay in a swanky Midtown hotel, then motor north after breakfast for a day trip or longer adventure in the heart of the East Coast mountains. For a skier like me it is the stuff of dreams, so that's exactly what I did last winter. A taste of Switzerland: Hunter Mountain I left Manhattan at 8am, and two and a half hours later was at Hunter Mountain in Upstate New York, in the land of Washington Irving's Rip Van Winkle, skiing on a pine-wrapped piste so quiet it felt like the sport had just been invented. This is the old world of east coast skiing though; Hunter opened in 1959 and has maintained the small-time feel of Europe's dinkiest resorts. The sleight of hand, however, is that the mountain is now under the operation of multi-resort owner Vail Resorts. It was the perfect Catskills ski day: the car park was eerily quiet, chairlifts whirred past empty, and snow cannons let pixie dust arches fly beneath them. When the sun fully rose, there was no ragged mountain profile like in Colorado or California, only rounded, rippling summits and legions of yellow birch, red spruce, chestnut oak and striped maple. The only real nod to being so close to New York City was a plastic, shoulder-height Statue of Liberty propped in the day lodge. In her right hand, a flaming gold torch, in her left, a copper-green pair of skis. That night — by far and away best of all — was a stay in nearby Tannersville at Hotel Lilien, a gorgeously creaky boutique guesthouse first opened in the 1890s. I joined former model-turned-hotelier Chris at the bar to find out more about why he signed up for living there, not in a fashion capital as he might have done. 'I had it all…Paris, Milan, Tokyo, catwalks, ad shoots, TV spots,' he told me over a beer. 'But there is some sort of magic here. It's not as fancy as other towns in the Hudson Valley. There's something going on and the mountain scene is simply wow.' Afterwards, I shuffled through drifting snow to the restaurant next door for a nacho cheese fondue with barbecue chorizo – you wouldn't get that in Switzerland. A taste of Austria: Windham Mountain Club I had the mountain to myself again the following day, this time at neighbouring Windham Mountain Club. The name makes it sound like a private member's resort (something Americans aren't shy about), and while the twin-peaked mountain is moving towards becoming a semi-private, all-seasons resort, the good news is it remains accessible for the time being and day tickets are heavily capped. As a result, the slopes are intentionally uncrowded, prime for racing down the double-diamond blacks and lapping the high-speed chairs and slope side lobster and mango sushi for $15 a pop – you wouldn't get that in Austria. A taste of France: Gore Mountain If Norman Rockwell had ever painted a New York resort, he'd have likely chosen Gore Mountain, the state's oldest and largest ski area. The expressionist lived just over the state border in Arlington, Vermont, and the resort presents an idealised view of American life in winter. Over two days I saw this in the thick smears of white on rock, the short runs through the stark pines, the red-cheeked, clumsy families laughing and falling about on skis and sledges as if on a Christmas card. One of the best places to seek off-piste in the state, Gore is the gateway to a much larger wilderness for ski tourers too: surrounding its crinkle of snow-daubed hills, Adirondack Park can fit all five of America's biggest national parks, including Yellowstone and Yosemite. Another lure is that Gore is one of the few resorts in North America that's owned by the state. 'It was built soon after the 1932 Winter Olympics in Lake Placid and still today every cent is pumped back into the facilities,' the resort's Julia Johnson told me. 'That's around $133 million for Warren County from Gore alone every winter. We're more than a mountain, we're a community dynamo.' This season, all that goodwill has funded the new North Creek Ski Bowl Lodge, the Hudson quad-chairlift and a bevy of state-of-the-art snowmaking systems. The town of Bolton Landing gave me a chance to admire the Adirondacks rising softly above the silvery basin. In the pinkish après ski light, I then got pleasantly drunk at The Gem, a barbecue joint where they love smoked wings, ribs and bourbon – you wouldn't get that in France. A day later I was back in Manhattan. Not in a sleazy speakeasy this time, but carting ski gear through the lobby of the Intercontinental New York Barclay near Grand Central. The looks from the reception desk implied it wasn't their usual check-in, but then something surprised me even more. As I dumped my boot bag, I saw the bar had been made over into a Swiss winter chalet, with antler chandeliers, vintage ski photos, table bowls of scented pine cones and mulled cider on the menu. Who knows? Maybe Manhattan is coming round to the idea of après ski after all. Essentials
