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The Fed concluded its two-day meeting on October yesterday, with the expected 25 basis point cut to the federal funds rate, bringing the target range to 3.75%–4.00%. the highlights of Powell comments were: (1) Job gains have slowed, with unemployment holding steady but risks to employment increasing. (2) Inflation has eased but remains somewhat elevated, with recent CPI data showing a rise to 3% year-over-year in September (up from 2.9% in August). (3) Balance Sheet Policy:

Today the Fed is expected to lower rates 25 bps. The chairman would probably feel more comfortable keeping rates intact, due to potential inflation pickup as a consequence of tariffs and government spending. But his world is not that simple (neither is ours). US labor market is deteriorating, and several big corporations are already announcing big layoffs. The real employers of the majority of the labor force, the small businesses are suffering and lower rates will help a lot

China just unveiled the 15th 5 year plan which will govern the country’s future froln2026-2030. The plan outlines seven core targets, which are: (1) High-Quality Development : Shift from scale to productivity, with domestic demand driving ~86% of GDP growth (up from prior periods). Boost consumption (targeting 56% contribution to growth) through expanded social security, rural revitalization, and regional coordination. (2) Scientific and Technological Self-Reliance : Achieve

Inflation is a global problem and it is slowly picking up again, not only in the U.S., but across the globe. In the chart below, you can see the latest CPI reports for different economies, and in most instances, prices are higher than they were in August. That should trigger a more restrictive monetary policy response. But central banks seem to be in a difficult spot, as unemployment is also going up, and economies are slowing down, conditioned by debt. What we are likely to

Central banks all over the world are cutting rates. According to the chart below, over the last 24 months, central banks have cut 312 times, one cut shy of the absolute maximum that occurred as a response to the 2008 Great Financial Crisis. If the Fed cuts next Wednesday, we will march the prior historical stretch. The major difference is that at the time, the financial world was on the brink of a depression; now, we don’t even have an officially confirmed recession. The Fed,

The expected US inflation report for the month of September was published yesterday by a short headed BLS. The report came slightly better than expected at 3.019% vs 3.1% for consensus. As you can see in the lower part of the chart below, the trend for CPI is upward sloping, not down, and if we take the 3 month average and annualize the result, we get 4.75%. So we do have an inflation problem, and it’s getting clearer that tariffs are pushing goods prices up. At the beggining

The IMF has released its world economic outlook report where among many things, they project growth for the global economy. For advanced ones, as you can see in the chart below, the expected growth for this year and the next, is an anemic 1.6%. It’s interesting that China is not included in the group of advanced economies, being the second largest and the one with the fastest growth. But what it’s also interesting is that the IMF does not foresee any major impact from AI in g

The U.S. total debt has reached $38Tn. The current pace of increase is roughly $25 billion per day. This rate accounts for the accelerated borrowing in recent months, which has averaged around $400-500 billion per month. And if this pace is maintained, we will reach $40 trillion by January 11, 2026, in just 80 days. In contrast, annualized projections for full-year 2025 nominal GDP point to $31 trillion, extrapolating recent quarterly trends. That implies a 122% debt to GDP

Despite tariffs and geopolitical events, corporate earnings continue to show incredible resilience. With the first 20% of companies results already out, 87% of them have beaten expectations, revenue is up 6.3% and earnings are up 9.2% YoY. Technology continues to lead the S&P500 in growth, but also in concentration, being responsible of 34% of the index behavior, followed by financials either 13%. Energy continues to be a laggard and a detractor from earnings growth, being al

The credit market is trying to remain calm after the bankruptcy of Tricolor Auto and First Brands. Banks, particularly the regionals, which are part of the chain in the loan market, financing the financiers of some of these loans, had been quietly taking money form the Fed to adjust their liquidity requirements, and have, for the moment, dodged the bullet. The leverage loan market (please see chart below), the floating rate brother of the High Yield market, is showing some si

On a Monday like today, 38 years ago, the S&P500 experienced the biggest single day percentage drop in history, 22.6%. It’s interesting to understand the context surrounding the fall of that day: the market rose 40% in ‘87 up to that point, and there were concerns of being in a bubble. There were also geopolitical tensions between thr US and Iran in the Persian gulf, which paired with low liquidity and program trading. Despite the fact that almost 40 years have passed, we’re

This Friday, the 24th, the BLS will bring back some furloughed government workers to calculate the CPI for the month of September. If they were understaffed before the government shutdown, one can only imagine the percentage of goods prices that will be “guessed”. Even if they follow a formal process, which they sure do, when decisions are being made based on decimal points, the margin of error should be contained, and it looks like it won’t be. The good news is, that in prac

With the latest run up in the price of gold measured in dollars, the total value of existing gold has reached $30Tn. It’s an incredible figure, particularly when we understand it has doubled in less than 2 years. But it makes sense to put in context with other global figures, such as total Equity market cap, global debt and leverage. The global equity market cap is estimated at $145Tn, almost 5X th total value of gold. The total value of the global debt is $340Tn (11X), which

The U.S. short term interest rate curve is under increasing stress. In the chart below you can see the difference between SOFR, the rate at which banks lend to each other, and Fed funds, the rate at which the Fed lends money. In a normal market, the difference between both rate should be close to zero. In a stressed one, banks start to express their doubts of being repaid on their loans to other banks by demanding a higher rate. Why is this happening now? After First Brands b

The inflation report for the month of September should have been published yesterday. Due to the government shutdown it will be published at the end of d of the month (scheduled for October 24th) just in time for the FOMC meeting. Tomorrow we should have the unemployment rate, with an expected 4.3% for September. As per the last speech by Jerome Powell, even though inflation is not where the Fed wants it, the unemployment is now the most important indicator to influence monet

Federal Reserve Chair Jerome H. Powell delivered his keynote address, titled “Understanding the Fed’s Balance Sheet,” at the 67th Annual Meeting of the National Association for Business Economics (NABE) in Philadelphia. This was his final public remarks before the Fed’s October 28-29 policy meeting. The takeaways were: (1) The outlook for employment and inflation “has not changed much” since the September meeting. Powell signaled the committee is positioned for two more quart

Gold continues to make new all time highs, questioning the foundations of the fiat currency system. But it also poses a challenge for investors, that for the last 50+ years, did not have to worry about the currency in which they express the returns they achieve. In the current investment environment is not enough to obtain good nominal returns; it’s imperative to obtain positive real returns. Traditionally, real returns are simply calculated by subtracting inflation, typicall

The Chinese trade balance for the long of September was published yesterday. Both exports and imports were up more than expected. Exports increased 8.3%, even after a 27% decline in exports to the U.S., which marks the sixth month of double digit declines. This is showing how resilient and resourceful China is when it comes to trade. Imports went up 7.4% vs an anticipated 1.5%, which tells us our understanding of Chinese tarde mechanics is still very low. But pressure keeps m

The shakeout of markets on Friday was the result of decades of accumulated decisions made by China and the U.S. In 1979 China decided it...

The market ended the week on a sour note. Trump announced what seems to be a temporary break on the negotiations with China, questioning...