A solid gain in retail sales for October dealt another blow to folks who’ve been warning that a US recession is imminent. Consumer spending increased at a brisk pace last month, advancing 0.8%, which lifted sales 4.3% vs. the year-earlier level—the strongest gain in nearly two years.
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When’s the last time a Nobel Prize-winning economist unwittingly made a convincing case for separating one’s political views from analyzing the business cycle and instead favoring a quantitative-based framework for estimating recession risk? Last week, actually, when Paul Krugman, in the space of two days, veered from predicting a global recession to withdrawing the warning in what might be labeled a “nevermind” moment a la Emily Litella.
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Last week’s election of Donald Trump triggered widespread selling in global markets, based on ETF proxies representing the major asset classes. US equities bucked the trend with a strong gain for the five trading days through Oct. 11. Stock markets in developed economies also advanced, albeit with a fractional gain. Otherwise, prices were broadly lower last week.
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● An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy
By Marc Levinson
Summary via publisher (Basic Books)
An acclaimed economic historian describes how the postwar boom abruptly ended in the early 1970s, launching an era of political and financial turmoil that we’re still living in today. The decades after World War II were a golden age across much of the world. It was a time of economic miracles, an era when steady jobs were easy to find and families could see their living standards improving year after year. And then, around 1973, the good times vanished. The world economy slumped badly, then settled into the slow, erratic growth that had been the norm before the war. The result was an era of anxiety, uncertainty, and political extremism that we are still grappling with today.
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There’s a lot of uncertainty about what a Trump presidency means for the US economy over the medium- and long-term horizons, but for the moment there’s nothing fuzzy about sentiment in the Treasury market. The benchmark 10-year yield jumped to its highest level since January in the two trading days since a billionaire reality TV star won the keys to the White House.
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Donald Trump’s election as President of the United States on Tuesday coincides with a colossal failure of the data models that predicted the opposite. Some commentators have been quick to see parallels between the crash of quantitative political forecasting and efforts to estimate recession risk in real time. But the two efforts are very different animals, or at least they can be, depending on the model design. The devil’s always in the details, of course, although a well-designed macro model that focuses on estimating the probability of economic contraction can avoid many of the pitfalls that bedevil election forecasting.
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In a shocking upset that few political pundits expected, Donald J. Trump was elected as the 45^th President of the United States. His populist victory negated forecasts from countless “experts”, polls, and political models that projected a loss for the real estate developer and reality TV celebrity.
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As the US prepares to elect a new President today, inflation chatter is bubbling anew. Although pricing pressure remains low, there are hints that the next occupant of the White House may oversee an economy that’s running a bit hotter in terms of the inflation trend. We’ve heard this forecast before, only to learn that the reflation trade crashed and burned. Is time different? Maybe, although it’s too soon to say for sure. Meantime, let’s look at some numbers for considering what the future may bring.
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The first week of November wasn’t kind to stocks, commodities, or real estate investment trusts (REITs), but a falling US dollar supported foreign bonds—the only corner of the major asset classes to post significant gains, based on a set of proxy ETFs.
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