Macro Briefing: 8 January 2024

* House and Senate leaders announce deal to avert government shutdown
* Expected decline in US core inflation for December supports Fed easing outlook
* China shadow bank Zhongzhi files for bankruptcy
* Will Xi’s new economic plan for China trigger a new trade war?
* US payrolls rose more than forecast in December
* S&P 500 earnings growth is expected to slow to a crawl for Q4:

Rising US debt is a “boiling frog” for the US economy, JPMorgan warns. “The problem for the US is the starting point; every round of fiscal stimulus brings the US one step closer to debt unsustainability,” JPMorgan strategist Michael Cembalest says. “However, we’re accustomed to deteriorating US government finances with limited consequences for investors, and one day that may change.” He predicts that markets and rating agencies will force the government to make “substantial changes” for entitlement spending and taxes. “The US has run out of the road on that one,” Cembalest predicts for reductions in discretionary spending. notes: “Ultimately, interest payments threatening to eat up everything else appear to be the only disciplinary force left that is able to pressure Congress to do something beyond grandstanding, but obviously not yet.”

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