Sonu Varghese
Why Lower Oil Prices Haven’t Translated to Relief at the Pump
Oil prices have collapsed in recent months, with WTI crude oil prices now closer to $60/barrel after hitting $80/barrel in mid-January. Prices are down over 10% from the beginning of the year, and over 20% from peak levels in January. Normally, you’d think this would translate to lower prices at the pump. But that’s not …
Sonu Varghese
May 15, 2025
How To Identify a Recession, and Why It Matters for Investors
Recession calls have increased since the Liberation Day tariff extravaganza, with most economists increasing the odds of a recession in the next 12 months quite significantly relative to odds at the beginning of the year. The Wall Street Journal’s panel of economists raised the probability of a recession in the next 12 months to 45% …
Sonu Varghese
May 9, 2025
The Fed Is Buying Into the Tariff Bull Case, but That Pushes Out Cuts
The Federal Reserve (Fed) didn’t move policy rates at their May meeting, keeping them in the 4.25-4.50% range. This was widely expected, but all eyes (and ears) were on how they would telegraph future moves. Short answer: they didn’t. The only major change in the official post-meeting statement was that risks of higher unemployment and …
Sonu Varghese
May 8, 2025
The Labor Market Hasn’t Cracked, but That Means Higher Rates for Longer
The economy created 177,000 jobs in April, above expectations for 138,000 jobs. At the same time, this number can be revised quite a lot. (Job creation in February and March were revised down by a combined 58,000.) This is why the 3-month average is more useful, and right now that’s at 155,000. That’s not great, …
Sonu Varghese
May 2, 2025
What Next? The Bull Case and the Bear Case
Uncertainty may be the new normal. Markets have been extremely volatile, with the S&P 500 experience nine 1%+ intraday moves over the first three days of this week. It’s not that we’ve never seen volatility before — that’s part and parcel of investing. The difference now is that markets are hanging on, and reacting to, …
Sonu Varghese
April 24, 2025
The Fed Is Caught Between a Rock and a Cold Hard and Lonely Place
Federal Reserve (Fed) Chair, Jerome Powell, just gave us the most detailed description of how they’re thinking about policy in the face of massive tariffs. He was speaking at the Economic Club of Chicago, and participated in a Q&A after, with the former head of India’s Central Bank and University of Chicago professor, Raghuram Rajan. …
Sonu Varghese
April 17, 2025
Here’s How the US Tax Code Results in a Larger Trade Deficit
Happy Tax Day! Or not. Though if you’re a large multinational, tax day in the US doesn’t really matter. In fact, to “celebrate” Tax Day, I’m going to discuss how the US tax code impacts the trade deficit. This is very relevant now because of everything going on around tariffs, with one of the stated …
Sonu Varghese
April 15, 2025
3 Unusual Things About This Selloff
(Updated as of 3pm CST 4/9/2025) We had the largest tariffs in over 100 years on for about 12 hours, before President Trump paused them for 90 days for countries that did not retaliate. That’s a relief, though we could be right back here in 90 days. But hopefully this gives the White House time …
Sonu Varghese
April 9, 2025
A Solid Payroll Report Means the Fed Stays on the Sidelines
The economy created 228,000 jobs in May, well above the 140,000 that was expected by forecasters. Monthly numbers can be noisy (especially since some of the jobs created could be a rebound from lower-than-expected numbers after terrible weather January and February) and so let’s look at the three-month average. That’s running at 152,000, which should …
Sonu Varghese
April 4, 2025
The Tariffs Are a Big Deal and Risks Are Very High
Tariffs are here and in a big, big way, much bigger than anyone expected. And it isn’t really reciprocal tariffs. The calculation of tariffs is based on the trade deficit the US has with each country, and nothing to do with actual tariffs other countries charge on US goods. For example, say a country exports …
Sonu Varghese
April 3, 2025