Talking Pies, Pi Day & Patty’s Day with Warren Pies (Ep. 126)
Mar 12, 2025
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Warren Pies, Co-founder of 3Fourteen Research, joins the discussion, offering expertise in macro quantitative research. They explore the latest job numbers, stressing that despite concerns, key indicators like residential construction payrolls are holding steady. The Fed's challenge of finding a neutral interest rate and its potential impact on economic growth takes center stage. Additionally, they celebrate Pi Day and St. Patrick’s Day with lighthearted anecdotes about favorite pies and Chicago's iconic green river tradition.
Current job figures indicate economic resilience, with strong residential construction payrolls suggesting no imminent downturn risks.
The Fed's challenge lies in determining neutral interest rates while balancing inflation concerns and the need for economic growth support.
Oil price trends, while beneficial for inflation, present significant challenges for energy companies navigating market volatility.
Deep dives
Macro Economic Indicators and Job Market Outlook
The recent job numbers indicate the economy is not facing a significant crack, as reported figures came in slightly below expectations. There is a need for careful monitoring of residential construction payrolls, which serve as crucial indicators for economic downturns. Currently, these payrolls remain at cycle highs, suggesting that the housing market isn't experiencing a major downturn yet. Analysts believe that job losses, often stemming from cyclical employment sectors like construction, are vital signals to gauge potential recessions.
Federal Reserve and Interest Rates Dynamics
The concept of 'neutral' interest rates is emphasized, where the Fed must determine appropriate terminal rates balancing inflation and growth risks. Analysts anticipate that the Fed's stance may need to remain restrictive longer, especially with an optimistic outlook for overall GDP growth still in play. There is a widespread expectation that high mortgage rates are suppressing the housing market, which could have long-term implications if sustained. The ongoing discourse suggests a potential shift in market sentiment towards the Fed’s future actions regarding interest rates.
Risks and Realities of Government Layoffs
Government layoffs have surged, reflecting a significant concern over potential economic contractions and uncertainty in various sectors. These layoffs may not only affect federal employment but also ripple into local governments and adjacent industries dependent on government funding. A cautious stance is recommended as economic factors suggest that previous resilience could give way to contractions without careful monitoring. The impact of government job losses on non-cyclical sectors remains an essential consideration for maintaining economic stability.
Tariffs and Their Economic Impact
Concerns around recent tariff policies indicate a shift in financial market dynamics that could affect the Fed’s strategic decisions. Analysts foresee that tariffs could deter the Fed from implementing cuts at signs of economic weakness due to the potential inflationary pressures they create. The ongoing uncertainty highlights the need for investors to remain vigilant about policy developments and their cascading effects on financial markets. There is a belief that tariffs complicate the economic landscape, potentially necessitating a recalibration of investor strategies.
Sector-Specific Insights on Oil and Energy Markets
The energy sector exhibits a complex dichotomy where current oil prices might suppress inflation but simultaneously pose challenges for energy companies. Price volatility has been a key concern with investors advocating for a more diversified approach to portfolio management. Despite positive signals from inventory depletions, analyst outlooks stress caution over potential market oversupply from OPEC. The underlying sentiment is one of careful navigation through an energy market that requires strategic foresight to mitigate risks associated with fluctuating prices.
In this week’s episode of Facts vs. Feelings, Ryan Detrick, Chief Market Strategist, and Sonu Varghese, VP, Global Macro Strategist are joined by Warren Pies, Co-Founder of 3Fourteen Research, to discuss market trends, recession risks, Fed policy, and, of course, some fun Pi Day and St. Patrick’s Day talk. They dive into economic growth concerns, interest rates, inflation, and why a growth scare doesn’t necessarily mean a recession is coming.
Key Takeaways:
Is a Growth Scare Just That? Market sentiment has shifted, but there’s no clear recession signal yet. Key indicators like residential construction payrolls remain strong.
The Fed’s Search for Neutral: Interest rates are still restrictive, but the Fed may need to cut more than expected this year to support economic growth.
Government Spending & Deficits: Large fiscal deficits have been a cushion for the economy, but potential cuts could introduce new risks.
Energy Market Insights: Oil prices are trending lower, which is good for inflation and Fed policy, but may present challenges for energy companies.
Market Volatility & Rate Cuts: The Fed’s reluctance to ease policy is contributing to a growth scare, but this may just be a temporary market correction.
Housing & Economic Signals: While mortgage rates remain high, housing market fundamentals aren’t signaling an imminent downturn.
Pi Day & St. Patrick’s Day Fun: We discuss Chicago’s green river tradition, our favorite pies, and how Warren’s firm got its name.
Join us for a special Women’s History Month edition of Facts vs Feelings, featuring top women leaders in finance discussing markets, investing, and industry insights. Register now: https://www.linkedin.com/events/7303883891440762880