Wall Street stalwart Jamie Dimon is concerned history may be repeating itself with the U.S. economy returning to the embedded stagflation it battled 50 years ago.
Speaking at the Economic Club of New York on Tuesday, JPMorgan CEO Dimon said now more so than ever the economy is resembling the 1970s, when both inflation and unemployment were high but economic growth was weak.
The last Atlanta Fed GDPnow was released on Wednesday -> 2.7% from 2.9%.
Street consensus is 2.5%. Q1 GDP will be published today
The annual interest expense on US debt is literally moving in a straight line higher, now at $1.1 TRILLION.
To put this in perspective, less than 3 years ago the annual interest expense on this debt was $450 billion. That's a 144% jump as total US debt has surged by over $11 TRILLION since 2020. Even in 2008, at the peak of the Financial Crisis, annual interest expense was just $450 billion. As interest rates surge and debt levels hit record highs, the US paying the prices for decades of deficit spending. Money is not "free" anymore... Source: BofA, The Kobeissi Letter
German economy has returned to growth.
German Composite PMI Index moved back to >50 growth threshold in Apr for 1st time in 10mths, driven by a buoyant services sector. At 50.5, up from 47.7 in March, it signaled a modest expansion rate in private-sector business activity. Service PMI recorded its strongest growth since Jun2023 (index at 53.3). The manufacturing PMI meanwhile remained in sub-50 contraction territory at 42.2. Source: HolgerZ, Bloomberg
Foodflation... After coffee, cocoa... now is Butter approaching all-time highs!
Breakfast is getting more and more expensive Source: Barchart
What a difference five months makes for the Fed rate cut outlook. 😉
Source: Bloomberg Intelligence, Markets & Mayhem
Financial conditions in the US are tightening as rates rise, equities fall and we see liquidity diminishing.
This setup could be set to continue as long as we see: 1) Signs of inflation remaining sticky or re-accelerating 2) The Fed cautious about the timing of cutting 3) Large deficit spending amid rising rates causing interest rate spend to surge (could hit $1.6T by Dec y/y w/o a rate cut) Source: Markets & Mayhem
How is it possible? Below is the number of initial filings for unemployment insurance.
Five of the last six weeks, the exact same number. Effectively the same number in the last 11 weeks, except for the holiday weeks (President's Day and Easter). As highlighted by Jim Bianco, how is this statistically possible? --- Consider The US is a $28 trillion economy. It has 160 million workers. Initial claims for unemployment insurance are state programs, with 50 state rules, hundreds of offices, and 50 websites to file. Weather, seasonality, holidays, and economic vibrations drive the number of people filing claims from week to week. Yet this measure is so stable that it does not vary by even 1,000 applications a week. Just the number of applications incorrectly filed out every week should cause it to vary more than this...
