Here’s the follow-up to the first installment of our year-end review of Book Bits columns published in 2024. Happy reading!

● Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk
Philipp Carlsson-Szlezak and Paul Swartz
Excerpt via Harvard Business Review
In 2022, when U.S. interest rates climbed, a cascade of emerging-market defaults were predicted—but they didn’t materialize. Also in 2022, and again in 2023, public discourse cast an imminent recession as “inevitable.” Instead a resilient U.S. economy not only defied the doomsayers but delivered strong growth.
For executives and investors such whiplash comes with two types of costs: financial and organizational. Consider the financial cost to automakers that reduced their semiconductor orders in 2020 because they misread the Covid-19 recession as a protracted economic depression. That meant they missed out on sales during the roaring recovery. And leaders can lose the trust of their organizations if they overreact to false alarms with abrupt reversals in strategy, operations, and communications. Clearly, getting the macro call right really matters.

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Your editor is heading to Boston for a long weekend. The fun resumes on Tues., Dec. 17. Please don’t break anything while I’m gone.

The market premium for the US 10-year Treasury yield continued to rebound in November vs. a “fair value” estimate calculated by CapitalSpectator.com. The increase marks the second straight monthly increase in the premium, which is now at the highest level since May.

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US consumer inflation edged higher to a 2.7% year-over-year pace in November, marking a second straight month of slightly higher increases. Core CPI, which strips out volatile food and energy prices, held steady at a 3.3% rate. “In-line core inflation clears the way for a rate cut at next week’s [Federal Open Market Committee] meeting,” says Whitney Watson, global co-head and co-CIO for fixed income at Goldman Sachs Asset Management. “Following today’s data the Fed will depart for the holiday break still confident in the disinflation process and we think it remains on course for further gradual easing in the new year.”

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The neck-and-neck horse race for first place among equity sectors has recently given way to a decisive lead for communications services stocks year to date, based on a set of ETFs through Tuesday’s close (Dec. 10).

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Saudi Arabia is struggling with its plan to keep crude oil prices elevated. “Rising US production and internal OPEC+ pressure limit the kingdom’s sway over prices,” reports The Wall Street Journal. Trump is a new source of uncertainty as US-based shale drillers may be embolded to lift output amid a push for deregulation. Meanwhile, the International Energy Agency estimates global supply will exceed demand by more than one million barrels a day next year without a production cut. Brent, the international oil benchmark, is down 6.5% this year.

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Disinflation has stalled recently, but economists are debating if this is a temporary blip that will soon give way to a softer trend. Tomorrow’s consumer price report for November will be widely read for an update.

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US small business optimism rose sharply in November, according to NFIB’s survey. “The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners,” says NFIB chief economist Bill Dunkelberg. “Main Street also became more certain about future business conditions following the election, breaking a nearly three-year streak of record high uncertainty.”

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It happened gradually, then suddenly. In a stunning development over the weekend, Syrian rebel groups overthrew the dictator Bashar al-Assad, who reportedly has fled to Russia. Although almost no one anticipated such a rapid power change, everyone agrees that the implications are far-reaching for the region and beyond.

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The fall of Syria’s president over the weekend puts the nation on uncertain path and poses new risks for the Middle East and beyond. The overthrew of the government has resuffled the geostrategic chessboard on numerous fronts for Russia, Israel, Turkey and the US and other countries. “The Assad regime’s sudden collapse in Syria marks a profound and far-reaching geopolitical shift,” notes SpecialEurasia, a consultancy. “The rapid Syrian opposition military gains, spearheaded by Hayat Tahrir al-Sham (HTS), have significantly altered regional political and military conditions.” Qutaiba Idlbi, a senior fellow at the Atlantic Council advises: “The fall of the Assad regime presents an opportunity to address longstanding issues in Syria and the region. However, it is not a panacea and could lead to further instability if not carefully managed.”

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