Macro Memo: Summer is Over

The UpshotIn this article, we review:US Economy and Job MarketLong Bond Yields: Secular Meets CyclicalTariff Revenue & Bond YieldsThe Housing Unlock?The Trump Admin’s Plan for Mortgage RatesMacro Trades IdeasIn our last Macro Memo, we predicted:The US economy and job market will continue to slow without breaking. [Yes]Overall inflation flat or lower despite tariff effects on goods prices. [Half Right]“The Powell Struggle” leads to fiscal - monetary convergence.Tariff uncertainty resolves [Half Right]The Fed to signal openness to rate cuts [Yes]Falling long yields to unlock housing market [Yes and No]STIR markets price more cuts into the first year of Powell’s successor’s term versus out to the end of Powell’s term [Unch]Going forward, we expect:Cyclical economic slowdown and labor market weaknessThe Trump Admin to attempt to target lower mortgage rates utilizing GSE privatization and deregulationSelf-fulfilling seasonally turbulent asset markets, equity volatility for the remainder of Q3Increasing short-term inflation concernsFed rate cut in September but uncertainty further out as Fed board composition hangs in balanceThe market is juggling between inflation and growth risks again. Over the last three years, it seems like we’ve experienced an inflation scare every other quarter interlaced with a growth scare in between.

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