Apple in China

The neo-liberal consensus of free trade and integrated supply chains is under heavy strain due to growing populism in the developed world (which has seen stagnant wage growth) and in response to national security concerns. COVID-19 laid bare the glaring problems of not having domestic production in items such as pharmaceuticals and semiconductors. Both the Biden and Trump administrations have been focused on decoupling from China, albeit in very different ways. President Biden used the carrot in the form of industrial investment and corporate subsidies (i.e., the CHIPS and Science Act and provisions of Build Back Better). The Trump Administration has used the stick in the form of tariffs.

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Advisor Training, Bull and Bear, Economic Updates Tim Pierotti, Chief Investment Strategist Advisor Training, Bull and Bear, Economic Updates Tim Pierotti, Chief Investment Strategist

The Never-Say-Die US Consumer

The housing market, in most of the country, is getting weaker. Activity remains slow, prices are negative across the Sunbelt, and inventory of both new and existing homes are moving to the highest levels since the GFC. Employment is getting weaker. Continuing unemployment claims are making new highs on a weekly basis and even initial jobless claims are finally inching up. Measures of credit delinquencies in credit cards and auto loans are also making new post GFC highs. Consumer confidence surveys tell us that the consumer is beyond pessimistic.

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Economic Updates, Bull and Bear, Advisor Training Tim Pierotti, Chief Investment Strategist Economic Updates, Bull and Bear, Advisor Training Tim Pierotti, Chief Investment Strategist

All Eyes on Congress and Our Waning Fiscal Credibility

“We expect federal deficits to widen, reaching nearly 9% of GDP by 2035, up from 6.4% in 2024, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation. We anticipate that the federal debt burden will rise to about 134% of GDP by 2035, compared to 98% in 2024.” Moody’s Friday May 16th

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Advisor Training, Economic Updates, Bull and Bear Tim Pierotti, Chief Investment Strategist Advisor Training, Economic Updates, Bull and Bear Tim Pierotti, Chief Investment Strategist

Making Sense of the Senseless

Markets are intuitively rallying as it appears trade wars are ebbing and institutional investors find themselves wrong-footed. That said, tariffs have not gone away altogether, and they are and will be a regressive tax on working class Americans. They will also continue to disincentivize capital spending and hiring intentions.


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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

The Sentiment Data That Cried Wolf

CEO confidence recently hit the lowest level, by one measure, in fifteen years and yet Q1 earnings have been strong and ahead of Wall Street expectations.

Consumers, according to The Conference Board and the University of Michigan, are in a panic and yet spending at retail and among Visa customers show few signs of weakness.

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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

The Regressiveness of Tariffs is the Problem

Consumer confidence has taken a significant hit over the last couple of months and the impact of tariffs has not even materialized yet. Barring a policy reversal from the Trump administration, it is hard for us to envision an economic scenario that does not involve a recession when such a large cost of living shock is looming for working class Americans. - Tim Pierotti

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Bull and Bear, Economic Updates, Advisor Training Tim Pierotti, Chief Investment Strategist Bull and Bear, Economic Updates, Advisor Training Tim Pierotti, Chief Investment Strategist

The Mill is Never Coming Back

"We don’t have a time machine. We can’t go back and re-write NAFTA or the terms by which China entered the WTO. We can play the hand which we are currently dealt. The US needs high ROI investment. The US needs to focus on ensuring that our population is the best educated in the world so that we continue to be the center of global innovation." - Tim Pierotti

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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

Housing Stocks Aren’t Buying the Radical Experiment

The current consensus Wall Street narrative regarding this administration’s economic policy goes about like this: Bessent et al want to slow the economy to get rates down.  With lower rates, companies will be able to refinance more cheaply and that will put the economy in a better position to grow longer term. 

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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

The Bessent Put

We have been making the case for more than a year now that the unprecedented fiscal support in the economy, the easy financial conditions, the secularly tight labor market and the generational transfer of massive, accumulated wealth would drive the economy and risk assets higher until inflation and interest rates get in the way.

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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

The Reality of Tariffs vs the Rhetoric

There is a lot of debate happening right now, largely along partisan lines, about whether tariffs are inflationary.  Market participants in support of the President-elect are loudly making the case that the example of the tariffs of 2018 prove that tariffs are not actually inflationary.  The Fed Staff and the economics team at Goldman Sachs have empirically demonstrated those claims to be misleading at best. The chart below from Goldman illustrates the reality of what happened last time around.  The chart shows that while broad measures of inflation showed little impact, the industries impacted by the tariffs saw meaningful inflation.

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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

Global Capitalism’s Checks and Balances

In the wake of the recent “Red Wave” election results, one might be wondering if there are any restraints on the incoming administration. Republicans will control the White House and both the House and Senate. The Supreme Court is controlled by conservatives who have expressed an unprecedented view of the “Unitary Executive”. In some regards those concerns may be justified and we are likely to see a White House that is unrestrained relative to history. But when it comes to the economy, this administration will still have to answer to a higher authority: the bond market.

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Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist Economic Updates, Advisor Training, Bull and Bear Tim Pierotti, Chief Investment Strategist

The Economic Realities of Illegal Immigration

The Postpandemic U.S. Immigration Surge: New Facts and Inflationary Implications, a new working paper from The Dallas Fed answers an economic question that has become a highly political one. Has the significant rise in unauthorized immigration exacerbated inflation? The answer, according to a team of economists led by Anton Cheremukhin, is no, nor has it been disinflationary. In summary, they conclude, “Contrary to the popular view, we find little effect on inflation, as the increase in supply was largely offset by an increase in demand.”

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