The bond market has been in a holding pattern this month, looking for new catalysts for clues on assessing the outlook for interest rate cuts. On one side of the ledger: ongoing concerns that tariffs will raise inflation and convince the Fed to keep policy steady. But with signs of slowing economic growth, the case for trimming rates is building.
Monthly Archives: August 2025
Macro Briefing: 22 August 2025
Chipmaker Nvidia’s earnings report next week could be a major factor for market sentiment. “On a relative basis, Nvidia’s earnings is the largest event for the S&P 500 for the next month,” said Stuart Kaiser, an equity strategist at Citi. Nvidia’s share of the S&P 500’s market value has surged in recent years and is currently around 8%.
Homebuilder Stocks Are Rallying. Is The Optimism Premature?
It’s been a rough year for the residential property market, but the tide is turning favorable again, or so the recent rally in homebuilder shares suggest. A closer look, however, reminds that uncertainty about several key factors for real estate remain in flux, including the outlook for mortgage rates and the health of the economy.
Macro Briefing: 20 August 2025
US housing starts rose to a five-month high in July, led by construction of multi-family units. Newly issued permits for housing construction, however, fell to a five-year low, suggesting that the outlook for residential building is still bearish.
Risk Appetite Stays Resilient For Global Strategies
Whether its folly or prescience, markets continue to climb a wall of worry, effectively looking through tariffs and other risk factors that could threaten the bullish trend. But based on several sets of ETFs to measure the risk appetite through Monday’s close (Aug. 18), the broad trend from a global perspective remains positive.
Macro Briefing: 19 August 2025
US home builder sentiment turned lower in August, returning to the lowest level since 2022, according to monthly polling by the National Association of Home Builders (NAHB). “Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chairman Buddy Hughes.
Hints Of Rising Inflation Complicate Fed’s Next Policy Meeting
Ahead of the Federal Reserve’s annual conference in Jackson, Wyoming, which starts on Thursday (Aug. 21), the topic of inflation will dominate discussions. Although the latest updates on prices were mixed, there are several metrics that raise questions about the wisdom of cutting interest rates at next month’s policy meeting, which has become the consensus view of late.
Macro Briefing: 18 August 2025
US retail sales rose for a second month in July, highlighting consumer resilience. The news eased concerns that consumer spending is vulnerable to tariff-induced inflation. “As long as consumer spending holds up and companies are able to retain workers because of that robust spending, the flywheel can continue to spin, pushing corporate profits and stock prices higher,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in commentary issued Friday.
Book Bits: 16 August 2025
● The Price of Money: A Guide to the Past, Present, and Future of the Natural Rate of Interest
Edited by Jamie Rush, et al.
Summary via publisher (Oxford U. Press)
An accessible guide to the natural rate of interest, why it is likely going up, and what that means for the future of the global economy and markets. Ask most people who sets interest rates, and they’ll say it’s the central bank. At a fundamental level, though, decisions by the Federal Reserve, European Central Bank, and their peers around the world are constrained by the natural rate of interest. The natural rate – the interest rate that balances supply of saving and demand for investment, whilst keeping inflation low and employment high – has moved from academic obscurity to a central role in monetary policy, and the operation of the economy and financial markets.
Research Review | 15 August 2025 | Forecasting
Partisan Bias in Professional Macroeconomic Forecasts
Benjamin S. Kay (Federal Reserve), et al.
June 2025
Using a novel dataset linking professional forecasters in the Wall Street Journal Economic Forecasting Survey to their political affiliations, we document a partisan bias in GDP growth forecasts. Republican-affiliated forecasters project 0.3-0.4 percentage points higher growth when Republicans hold the presidency, relative to Democratic-affiliated forecasters. Forecast accuracy shows a similar partisan pattern: Republican-affiliated forecasters are less accurate under Republican presidents, indicating that partisan optimism impairs predictive performance. This bias appears uniquely in GDP forecasts and does not extend to inflation, unemployment, or interest rates. We explain these findings with a model where forecasters combine noisy signals with politically-influenced priors: because GDP data are relatively more uncertain, priors carry more weight, letting ideology shape growth projections while leaving easier-to-forecast variables unaffected. Noisy information therefore amplifies, rather than substitutes for, heterogeneous political priors, implying that expectation models should account for both information rigidities and belief heterogeneity. Finally, we show that Republican forecasters become more optimistic when tax cuts are salient in public discourse, suggesting that partisan differences reflect divergent beliefs about the economic effects of fiscal policy.