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Policy
For better or worse, policy influences markets. Learn how U.S. and global markets can be impacted by corporate tax rates, government regulation, the Federal Reserve and interest rates, inflation, tax reform legislation, trade policy, trade imbalances, and foreign policy.
One of the most important debates today relates to the potential impact that generative artificial intelligence (Gen AI) models will have on the U.S. labor market. Some observers see the ongoing process of automation as a harbinger for widespread layoffs, not only for low-skilled workers but also for more highly skilled professionals.
This issue of how effective sanctions are in dealing with recalcitrant nations is being discussed once again amid reports that Russia’s economy is faring better than expected two years after the U.S. and European Union imposed sweeping sanctions on it.
The question of "how concerned should investors be about the Western Alliance" is being raised on both sides of the Atlantic following recent statements by former President Donald Trump regarding NATO, in which he indicated a willingness to support Russia in its actions against NATO members who fall short on defense-spending goals.
With the U.S. economy performing surprisingly well and the stock market setting record highs, many investors call what is happening the "Goldilocks economy." The main concern now is geopolitical, with the possibility that the Israeli-Hamas conflict could spread throughout the Middle East. However, there is also the risk of a global trade conflict with China that is going unnoticed.
Expect the oil market to remain balanced in 2024 with oil in the low $70s, a level which could have a minor impact on non-OPEC growth. Midstream equities, under such a scenario, should experience some modest volume growth, while upstream producers could see lower cash flows relative to 2023.
What does the January jobs report mean for the strength of the economy and possible implications for the 2024 elections? And how does this impact the debate about whether the economy is headed for a recession?
As investors look ahead to 2024, the central concern on their minds is the extent to which the Federal Reserve will ease monetary policy in the new year.
The end of each year is usually a time for reflection about how the economy and markets fared, as well as for assessing future prospects. Normally, the assessments are a blend of both positive and negative considerations. 2023, however, was different.
In anticipation of the upcoming year, investors are eminently focused on a pivotal question: Are the Federal Reserve's interest rate hikes concluded, and is a rate reduction on the horizon for the next year? While interest rate expectations always matter, the gyrations of financial markets – stocks, bonds, and the dollar — have been dominated the past two years by expectations about what the Federal Reserve will do.
While global investors focus on the prospects for the U.S. and China, they should not overlook the euro zone, where the economic outlook has shifted this year. The initial consensus was that Europe would be adversely impacted due to its heavy reliance on Russian natural gas. Instead, the euro zone economy proved resilient, primarily because of unexpected plunges in natural gas prices and crude oil.
The Federal Reserve’s decision to leave interest rates unchanged at the recent Federal Open Market Committee meeting was widely expected, given Chair Jerome Powell and other officials previously signaled the outcome.
World trade has slowed over the past five years due to tariffs imposed, supply chain disruptions, the Russian-Ukraine conflict, and, recently, U.S. export controls, which are intended to hinder Chinese advances in technology. The challenge for policymakers now is to find a way to ease tensions before fissures in the global trading system leave it divided.
Shockwaves over the debacle to elect Kevin McCarthy (R-Calif.) House Speaker have dissipated by now, but the fallout over raising the federal debt ceiling is just beginning. How will this play out and how will it impact the economy?
As 2023 gets underway, most forecasts for the global economy are downbeat as central banks combat inflation by raising interest rates. Among developed economies, Europe faces the worst predicament because it is also impacted by a squeeze in natural gas supplies from Russia.
In the wake of the 2022 midterm elections, many observers believe the most likely outcome for fiscal policy over the next two years will be gridlock. This comes after the Democrats enacted major spending programs in the past two years.
During the past year, investors have fixated on how pro-active the Federal Reserve was in tackling inflation. What will happen if the Fed does not retain its 2% inflation target in 2023?
Following China’s 20th Party Congress in mid-October, most experts’ assessments have been overwhelmingly negative. As was widely anticipated, Xi Jinping was re-elected as party general secretary for an unprecedented third five-year term. Does this signal a "Great Leap Backward" for China and how will it impact the global economy?
One of the long-standing public policy disagreements between Republicans and Democrats is over when is it appropriate for government to intervene in the economy. Republicans are prone to criticize government programs as being wasteful and inefficient, while Democrats maintain they can help fill gaps that the private sector cannot or will not address. The Infrastructure Investment and Jobs Act (IIJA), enacted one year ago, is an area of bipartisan agreement.
Following the midterm elections, pundits are scrambling to explain how Republicans failed to capitalize on the results, when several issues favored them. Heading the list were voter worries about high inflation, the weakening economy and rising crime. How then were Democrats able to overcome such formidable obstacles?
The Federal Reserve’s decision to boost the federal funds rate by 75 basis points at its November meeting was widely anticipated by market participants, following a disappointing September inflation report. Instead, investors have focused on the possibility that the Fed may slow the pace of policy tightening at subsequent Federal Open Market Committee (FOMC) meetings, which fueled the best monthly return for the Dow Jones Industrial Average since 1976.
The Federal Reserve and policy makers abroad were correct in pinpointing supply chain disruptions as the principal cause of the surge in goods prices last year. As pressures have eased, so have U.S. goods prices. So, why has inflation remained high?
With the midterm elections upon us, polls show that inflation looms as the top issue on voters’ minds. Indeed, it is the biggest obstacle Democrats face to retaining control of both houses of Congress.
Although the long-term correlation between prices for crude oil and natural gas is low, the magnitude of the price divergence today is unusually high. Consequently, why is it happening and what does it spell for the respective economies and financial markets?
The past few years suggest we may be entering a period of “Great Volatility” as the global economy has been buffeted by the COVID-19 pandemic, Russia’s invasion of Ukraine, and the effects of climate change. While these forces will likely lead to weakness ahead, decisions that central banks take to address high inflation can mitigate and limit the ultimate impact of these shocks.
As we reach the midpoint of the year, investors find themselves confronting a highly challenging environment, with the Federal Reserve now emphasizing the urgency of bringing inflation under control over maintaining “maximum” employment.
Investors should monitor the state of emerging economies, who often feel the fallout from Fed tightening when the U.S. economy is weakening and in several instances have caused the Fed to back off raising rates.
With federal debt at record levels, inflation at four-decade highs, and the Federal Reserve about to tighten monetary policy, federal spending must be brought under control. How can President Biden move ahead with increased defense spending while also focusing on domestic priorities?
The debate over SALT deductions raises fundamental questions about the taxation policies of high- and low-tax states. It also involves a judgment about whether the combined federal-state-local tax for the states most affected by the deduction is unduly burdensome.
The case for expanded immigration is straightforward: It provides a means to ensure long-term economic growth while tackling labor market shortages and high inflation.
Are inflation pressures likely to moderate, or is higher inflation here to stay? And, should the Fed be doing more? This episode discusses how investors may consider positioning their portfolios in light of these risks.
As political leaders work to shift reliance on fossil fuels to alternative forms of energy, a major question is how to execute this without creating an energy shortage and higher inflation.
Global energy prices have surged to their highest levels in several years. What are the sources of these price pressures? And what can policymakers do to alleviate them?
When the international monetary system shifted from a fixed to a floating exchange-rate regime 50 years ago, it was a milestone event that marked the end of a prolonged period of low inflation, strong economic growth, and financial stability.
As President Biden will find out, the easy part of governing is identifying worthy public needs; the hard part is paying for public programs and making sure they deliver on their objectives.
Positive news surrounding the COVID-19 vaccine rollout has led to a rally in oil prices, which were up 75% from November of 2020 through March of 2021. With questions about demand lingering, Saudi Arabia announced a surprise reduction in oil production. OPEC+ has stated that they support a reduction of global oil inventories, which is expected to provide a tailwind for oil markets going into the first half of 2021. Now, we wonder, is another commodity super cycle next?
One of the main objectives of the incoming administration is to counter growing income inequality in America. However, investors are likely to judge the Biden administration’s policies primarily by how they impact the U.S. economy overall.
Congress crafts a plan providing much-needed relief for COVID-19. Several factors coalesced encouraging Congressional leaders to reach an agreement but it may be difficult to sustain the spirit of compromise.
With the most contentious election behind us, our Senior Economic Advisor provides a recap of the Trump administration and the key policy changes. Looking ahead, Nick assesses Biden's fiscal plan and discusses the intertwined effects of fiscal policy and Fed actions as well as U.S. trade policy and our relations with China.
Listen to a replay of the November 11th Beyond the Elections: Assessing Looming Policy Changes program with international economist and author Nicholas (Nick) P. Sargen, Ph.D.
The U.S. economy made huge strides in recovering from business shutdowns but without the slowing of COVID-19 the economy is still not out of the woods. Our Senior Economic Advisor reflects on the third quarter, previews what’s on the horizon for the balance of 2020, and expands on possible changes in fiscal policy if Biden wins the November elections.
A review of the Fed's monetary policy framework resulted in a new way to target inflation and a broader definition of full employment. Senior PM Dan Carter explains the new strategies and challenges they may present.
Joe Biden intends to unwind key provisions of the Tax Cuts & Jobs Act to finance new initiatives as promised during his campaign. Surprisingly, thus far, the stock market has not reacted even though Republicans have decried the proposal and polls show Biden with a decisive lead. This article explains why.
OPEC is being reborn, and despite the tremendous drop in demand for oil and oil products, long-term fundamentals for oil have improved as the price of the commodity has collapsed. Allocating to high quality oil-exposed equities is beginning to look like a compelling opportunity for long-term investors.
OPEC is being reborn, and despite the tremendous drop in demand for oil and oil products, long-term fundamentals for oil have improved as the price of the commodity has collapsed. Allocating to high quality oil-exposed equities is beginning to look like a compelling opportunity for long-term investors.
Small businesses have been significantly affected by the lockdown due to the coronavirus pandemic. The federal government has prioritized these businesses, passing a second bill supplementing the Paycheck Protection Program (PPP). However, opinions on PPP vary. In the first quarter, many larger cap stocks outperformed small cap stocks, but small caps have shown signs of recovery.
The U.S. stock market’s surge since October has been linked to the Fed’s balance sheet expansion, but the main driver is expectations that the global economy will improve. The coronavirus scare is posing a test that will likely be temporary.
U.S. trade policy now appears headed for a showdown with China, as the administration is set to announce duties on an additional $200 billion of Chinese imports.
Two developments, the G-7 meeting in Canada and the historic summit between President Trump and Kim Jong Un, have dominated the news in recent days. Yet, global markets have not reacted to either development.
The Treasury bond market has come under scrutiny as the 10-year yield pierced 3% last week, while the yield curve has flattened considerably over the past year.
The U.S. dollar has come under pressure this year after steadying in late 2017, even though economic data have been supportive and the Fed is expected to raise interest rates several times.
With the passage of a Senate version of a tax bill that is close to the House bill, the stage is set for the biggest overhaul of the U.S. tax code since the Reagan era.
Notwithstanding adverse political news at home, the Trump rally has continued amid favorable economic news and investor optimism about pending corporate and personal income tax cuts.
Donald Trump ran for office on restoring lost jobs in manufacturing by renegotiating trade deals and imposing tariffs on imports from countries that are deemed to hurt American workers. Now that he is President, market participants are focusing on what he will do.
Policy
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