FICC Focus Fed Easing Cycles and Unsustainable Fiscal Policy: Macro Matters
Jul 25, 2024
Lara Rhame, the chief US economist at FS Investments, joins Ira Jersey and Will Hoffman to tackle the current state of the economy. She discusses how economic resilience is shaping Federal Reserve policy decisions. The trio delves into the potential impacts of upcoming U.S. elections on Treasury markets and the effects of fiscal policy on long-term interest rates. They also explore the implications of sustained deficits and how robust economic indicators contrast with consumer sentiment, revealing a complex landscape for investors.
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Strong Economic Momentum
- The US economy is currently robust, with strong performance across household consumption, business investment, and government spending.
- Growth is above sustainable levels, but a slowdown towards a healthier pace is expected.
Jobs Fuel Consumption
- Despite concerns about depleted savings, consumer spending remains strong, driven by a healthy job market and wage growth.
- Focus should be on job prospects, as significant changes there typically precede shifts in the business cycle.
Fiscal Outlook and Elections
- The US fiscal outlook depends heavily on election outcomes, with differing potential impacts on the Treasury market.
- High deficits during economic strength and potential shifts in Fed leadership under a new administration are key considerations for investors.