Money Talk Business and Market Discussion
May 20, 2025
Carlos Casanova, a Senior Asia Economist at UBP, and Frank Benzimra, Head of Asia Equity Strategy at Societe Generale, dive into pressing economic issues. They dissect Moody's credit rating downgrade of the U.S. and its potential ripple effects on equity markets. The duo discusses rising U.S. debt and its sustainability, alongside trade impacts from delayed shipments from China affecting U.S. inventories. They also analyze emerging market equities, emphasizing investment strategies in India and China, and the mixed signals from global economic conditions.
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Moody's Downgrade Reveals Rising Term Premium
- The Moody's US credit rating downgrade reveals rising term premium not explained by Fed policy.
- This increase could cap the US equity market and potentially weaken the dollar further.
Rising US Debt Costs Challenge Sustainability
- US interest payments on federal revenue could reach 30% by 2035, up from 9% in 2021.
- Rising interest expense and military spending make debt sustainability challenging for the US.
Tariffs' Delayed Inflation Impact
- Tariff impacts on US inflation may be delayed by 1-2 months due to supply chain lags and high inventories.
- Inflation surge risks might shift to Q4 or early next year if US-China trade tensions persist.