Perception and reality

Daily update

Former US President Trump was making some strongly pro-Russia comments over the weekend, in the wake of increasingly hostile rhetoric toward China. Markets to date are largely unmoved. Investors are not yet prepared to price scenarios for the November elections. While defence and trade policy fall under presidential commander in chief powers, fiscal policy will depend on Congress as well as the White House.
The gap between economic data and economic perceptions is wide in the US, as it is in other developed economies. Economic data is increasingly less reliable, but trends support a soft-landing scenario. The perception gap owes much to inflation—consumers are unhappy that price levels have not fallen to what they remember as “normal,” especially for high frequency purchases. The role of social media with doomscrolling and a dependence on anecdote may also widen the perception gap.
On the subject of perception gaps, there are several ECB speakers scheduled (including Chief Economist Lane). The ECB’s perception of the economy still seems some way away from that of the markets.
There is some US Federal Reserve comment, and Bank of England Governor Bailey speaks. The New York Fed also publishes inflation expectations—New York low inflation already, but perceptions may not match reality.