Ethan Harris
Ethan Harris
basic consumer medium near ok risk term
The basic story of the consumer is that he's OK in the near term and at risk in the medium term.
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The Fed's kind of locked into this cautious optimism mode. Everybody there has the same line about how once geopolitical risks abate things will get better.
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While the Fed is more than one person, Mr. Greenspan's retirement means less confidence in the Fed, with somewhat greater risk of both financial market instability and inflation.
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Real estate is a topic that has vaulted to center stage, ... The real reason the topic is hot and belongs on the front page of research reports is that the housing market is becoming more of an engine of economic growth, but is also the biggest risk to future growth if the boom goes bust.
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There's a chronic risk to the bond market from global economic recovery. Probably the most potent story is Japan.
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It suggests moderate growth in the year ahead, but I don't think there's much risk of a 'double-dip' recession.
accident along deficit factor gradual gradually lingering risk sitting trade
That's the big lingering risk factor sitting out there on the horizon. Will we have a gradual adjustment, where the trade deficit gradually improves, or will we have an accident along the way?
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Clearly the economy still has plenty of momentum with a little hint of inflation risk in the background.
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It is gradual step towards a little more flexibility. Inflation, the economy and the markets will dictate how much further they go. They say the economy is strong and that inflation risks are tilted a little to the upside. There is nothing yet in the data that will stop the Fed.
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It generally just adds to the case for investors taking a little more cautious view on risk and demanding higher returns on investments.
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In an ideal world, three simultaneous gradual adjustments would happen. The U.S. eliminates the budget deficit, China revalues by 30 percent and China works to rebalance growth more to consumption and less to exports. Of course none of this will happen and the pressure for protectionism from Congress grows.
friendly inflation major signals warning
It's not as friendly as some of the other inflation numbers, but it's just one indicator. We have no inflation warning signals from any of the other major inflation indicators.
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It's not a question of a sudden explosion in prices. It's more an erosion of the low-inflation psychology.
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Everyone is all zeroed in on the consumer now, but the truth is that the consumer isn't the driver now. Confidence is picking up, but still at average levels. Wage growth is slow and the bulk of the tax cut is already in place. Finally, with all the debt people have taken out over the past several years the burden of paying monthly bills is leaving less for discretionary spending.