Sonu Varghese
Revisiting 12 Predictions From Our 2024 Outlook: What We Got Right, and Wrong
As we get ready to release our 2025 Outlook, I thought now would be a good time to revisit our 2024 Outlook. I recognize this is rare in our world, as it’s not often you see strategists revisit and reevaluate their calls. We don’t really think of ourselves as forecasters in the strict sense of …
Sonu Varghese
December 27, 2024
The Fed Pulls a Grinch
The Federal Reserve (Fed) reduced the federal funds rate by 0.25%-points at their December meeting, taking the federal funds rate to the 4.25-4.5% range. This was expected, but it was completely swept aside. The market reaction should give you a sense of how bad it was: The S&P 500 fell almost 3% on Wednesday (December …
Sonu Varghese
December 19, 2024
A Big Unknown for 2025 Is the US Dollar, and That Matters
The dollar has been on a tear since the end of September, and especially post-election. It took a bit of a breather over the Thanksgiving week but swung up again over the last couple of weeks. The dollar is now up over 6% since the end of September (through December 12th). Just before the Thanksgiving …
Sonu Varghese
December 13, 2024
Two Big Clues That Tell Us Inflation Has Normalized
November inflation data, as measured by the Consumer Price Index (CPI) landed right along expectations. Headline CPI rose 0.3% and is up 2.7% from last year. Core CPI, which excludes food and energy, also rose 0.3%, and is up 3.3% year over year. These numbers are clearly over the Fed’s 2% target. Cue the cries …
Sonu Varghese
December 12, 2024
The Labor Market Is in a Reasonably Good Place, but There Are Risks
The November payroll report was going to be a tricky one to parse because of a bounce back from hurricane effects (which pulled down October payrolls) and the resolution of the strike at Boeing. The economy created 227,000 jobs in November, close to expectations, which somewhat made up for the low 36,000 number in October …
Sonu Varghese
December 6, 2024
A Fed Policy Error Is a Big Risk for 2025
Federal Reserve Chair, Jerome Powell, was quite upbeat about recent economic data during a moderated conversation with the New York Times Dealbook. He noted that the since the Fed’s September meeting, growth has improved, while downside risks to the labor market have declined. At the same time inflation has come in a little higher. As …
Sonu Varghese
December 5, 2024
This Is Why the Dollar Is Surging, and Why It Could Pose Risks
An underrated story right now is the US dollar, which has appreciated by over 6% since the end of September. A big driver of the dollar is relative growth rates between the US and everyone else. So, the outlook for the dollar really depends on how you think the US economy will do relative to …
Sonu Varghese
November 22, 2024
Why We Think Inflation Has Normalized and the Fed Can Cut Rates
The October Consumer Price Index (CPI) data held no surprises for markets, either to the downside or the upside. Since inflation had already normalized, that means the latest data confirms the pre-existing trend. Headline CPI rose 0.2% in October and is up 2.6% year over year. Core CPI (excluding food and energy), which is typically …
Sonu Varghese
November 14, 2024
The Economic Outlook Looks Pretty Good, and Opportunities Abound – Part 2
“We have two kinds of forecasters, the ones who don’t know and the ones who don’t know they don’t know” – John Kenneth Galbraith In Part 1 of this blog, I discussed a framework for thinking about the economic outlook in 2025. There’s clearly a lot of policy uncertainty ahead. As the incoming Trump …
Sonu Varghese
November 13, 2024
The Economic Outlook Looks Pretty Good – Part 1
Amidst all the election news, the Federal Reserve’s (Fed) November meeting almost went under the radar. The good news is that the Fed didn’t give us any surprises. As widely expected, they cut the federal funds rate by another 0.25%-points, taking it down to the 4.5-4.75% range. Fed Chair Powell pointed out that this is …
Sonu Varghese
November 8, 2024