Econ. and Fin. Market Public Speaker (PH. D Economics)
Chief Global Economist for JPMorgan Chase (1994-2019).
Senior Economist Barclays (1991-1994)
Economist, NY Federal Reserve (1989-1991)
Econ. Professor (Univ. of Dayton, 1986-1989)
Confidence Building A Little Beak At-A-Time
Chickens can teach us a lot about building strong bonds within large groups. People that raise chickens say that chickens have an amazing ability to thrive in settings surrounded by large flocks.
How to Raise the National Minimum Wage Fairly and Avoid Massive Job Losses?
There is considerable debate about raising the National Minimum Wage to $15.00 per hour. Not surprisingly, since adjusting such wages upward on a national basis is a blunt instrument, the Congressional Budget Office (CBO) estimates that raising the national minimum wage to $15.00 per hour could result in the loss of 1.4 million U.S. jobs.
Is the U.S. Government Doing Too Little or Too Much To Help The Economy During the Covid-19 Pandemic?
Yes, they are on both counts! Nominal U.S. GDP reached it trough in Q2:2020 and was down $2.2T but in Q3:2020 it was down by just $580b, respectively from Q4:2019. Yet, in Dec. we passed a $935b stimulus relief bill and are now trying to pass another $1.9T dollar package. That is about $2.8T worth of economic relief to plug up a shortfall of $580b as of Q3:2020. This is on top of the $3.5T worth of additional stimulus (e.g., the CARES Act and several others) prior to the stimulus package signed in Dec. 2020. Interestingly, the economic shortfall from this pandemic is expected to narrow further in Q4:2020 as Real GDP is likely to grow by around 5.0%. To be sure, if much of the recent proposed economic stimulus legislation is approved by Congress and signed into law by the President --- U.S. real GDP in 2021 is likely to grow by 6.0% after contracting by about 3.5% in 2020.
Were the U.S. S&P 500 gains in 2020 really surprising and what can we expect for 2021?
No! Dating back to 1928, the S&P 500 has risen by 22.6% during the years a U.S. recession has ended as was “likely” the case during 2020. We say “likely” because the official scorekeeper of business cycles, namely the National Bureau of Economic Research has not officially identified the end date of the current U.S. recession (as of the time of this writing) which they identified as beginning in Feb. 2020. However, many will agree that the recession probably ended in May or June 2020 as many economic indicators, e.g., U.S. employment reported sharp upturns. Against this backdrop, the reason for the muted 16.3% S&P 500 performance during 2020 could be attributed to outsized 33.9% downturn from Feb. 19, 2020 to March 23, 2020 that required lots of catching up, to recover such losses. Stated another way, the S&P 500 enjoyed a massive 67.9% gain from its low on March 23, 2020 through year-end. Our optimistic S&P 500 return expectations for 2021 our built on economic stimulus from the Federal Reserve and Fiscal policy that has occurred along with the successful rollout of multiple vaccines. If our base case scenario materializes, we expect U.S. equity markets will rise by a robust 15% return year in 2021.
What are the implications of having the Federal Reserve switch to Average Inflation Targeting?
The Federal Reserve began inflation targeting in Jan. 2012 when it announced that it would like to see the core Personal Consumption Expenditure Deflator, PCE (that excludes food and energy components) rise by about +2.0% per year. With average inflation targeting, it means that if inflation grew by less than 2.0% for a couple of years then it should be willing to tolerate and some might go so far as to say --- encourage inflation above this threshold so that over long periods of time, the growth in inflation approximates a 2.0% growth pace. The thought here is that by allowing the economy to run hotter and not worrying too much about inflation, the Unemployment Rates of “Persons of Color,” and others with “less schooling years” will have an opportunity to decline towards levels enjoyed by the general population, a laudable goal no doubt.
What Really Happened with the Off and On-Again US-China Trade Talks?
Both the US and China are struggling to recover from the woes of a health care and economic crisis. This is not a good time for either country to escalate trade tensions. The last thing either country needs at the moment is to cause financial market, business or consumer sentiment turn negative at the moment. That would surely slow the recovery process for both countries. As a case in point, witness the reaction of US and Global financial markets when they heard White House Advisor Peter Navarro hint that the Phase 1 trade deal with China was over. Not surprisingly, the retraction and clarifications came swiftly from both U.S. President Trump and Mr. Navarro indicating that the statement was not true and that the Phase 1 trade deal remained solidly on track.
Revealing the True Details Behind the U.S. Employment Report (Released in Early June 2020)
First, there was no manipulation of the data. However, during the month of May 2020, BLS employees compiling the data for the Household Survey (used to compute the national unemployment rate) counted an excess number of workers that did not show up for work as being employed in May 2020.
Are US Stocks Cheap Today?
Of course, not! The forward Price-to-Earnings (PE) ratio (using Consensus analyst estimates for Earnings) for the S&P 500 Index stood at a whopping 21.6 (as of June 1, 2020). This compares to the 5-year, 10-year, 15-year and 20-year averages for this ratio of 16.7; 15.0; 14.6 and 15.5, respectively. None of these come even close to the nose-bleeding levels we are seeing today.