Late cycle

Economics

Goldilocks - will the porridge ever overheat?

We're currently in a Goldilocks environment - not too hot, not too cold. How long can this last? Structural forces are depressing inflation but cyclical pressures are intensifying. Even if the microwave is less powerful than before, if you keep zapping the porridge for long enough, surely it will eventually overheat?

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Economics

Clueless, but not complacent

As the old adage goes, prediction is difficult, especially about the future. So instead, we explain some of our forecasting philosophy and where, if at all, we might be able to provide some insight about the economic outlook.

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Economics

Cycling uphill

The markets appear to have given up on President Trump delivering his campaign promise to boost growth. Yet despite the delay, there are signs this could be about to change with profound implications for the current goldilocks environment.

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Economics

Yo-yo clubs

Leicester city’s rise and fall over the past year mirrors that of financial risk premiums. Fundamentals are probably average but performance can oscillate wildly. The Fed wants to see monetary conditions tighten: this can come through a stronger dollar, higher risk-free rates or increased risk premiums.

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Economics

2.4: Legacy

Low US wage inflation seems to be a legacy of the collapse in commodity prices. As with the new series of 24, a plot twist should inevitably provide redemption to inflation hawks. Wages should pick up in line with headline inflation as the oil effect fades.

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Economics

Reservations about reserve workers

Just as football teams have reserve players they can use during the busy Christmas period, the Fed believes the US economy still has a large 'reserve army' of 'discouraged' workers who can keep wages low. We have reservations about this.

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Economics

Is economic forecasting more like rolling dice or owning a guinea pig?

Historically, the probability of a recession starting in any given year has been independent of the length of the preceding expansion. That makes economic forecasting much more like rolling dice than looking after a guinea pig. Thinking that we are "overdue" a recession because the expansion is "long in the tooth" is an example of the gambler's fallacy and can lead to erroneous investment conclusions.

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