Powell – pompom time?

Posted by: Paul Donovan

11 Dec 2019
  • US consumers face higher taxes from Sunday, unless the tariffs are delayed. US presidential adviser Navarro has said this is the president's decision. That is the problem for markets. US President Trump is somewhat difficult to predict. Media reports suggest China believes there will be no tax hike. Unless China knows the content of the Trump Twitter Feed in advance, China cannot be sure.
  • The Fed meets today. Today's consumer price inflation should be about normal. Growth is about normal. Unemployment is below normal. Today's negative real interest rates are abnormal. But trade uncertainty has made the Fed wary. Fed Chair Powell (a lawyer, not an economist) may feel the need to break out the pompoms and cheerlead the economy's strength.
  • The UK election campaign winds down. This does not mean the interminably tedious Brexit process winds down. That will go on, and on, and on. Overnight polls showed the Conservative party's lead is narrowing. With half the voters behaving as floating voters the result is still uncertain. Markets seem to price a Conservative majority.
  • The Eurozone is very quiet indeed. It gives investors time to prepare for tomorrow - the first ECB meeting presided over by Lagarde (a lawyer, not an economist).

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