Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, November 1, 2024

AI Summary. Using the quasi-random assignment of 760,000 children in U.S. military families, the authors estimate that childhood neighborhood quality affects SAT scores, college attendance, and earnings, with 20 years in a county one standard deviation "better" raising SAT composites by 10 points and earnings by 2.2 percentile points. Estimated effects are similar across race and sex.

Laura Kawano, Bruce Sacerdote, William Skimmyhorn and Michael Stevens National Bureau of Economic Research
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By equalizing average neighborhood quality for black and white families, Kawano et al estimate that the Army’s quasi-random locational assignment reduces the black-white earnings gap among the children of Army personnel at age 25 by 23%.

How much does childhood neighborhood quality affect test scores and earnings?

Core argument: Estimated neighborhood effects are three times more potent at the zip code level, where 20 years of exposure to a one county-level standard deviation better zip code raises college-going by 6.7 percentage points, SAT composite scores by 38 points, and age-25 income percentile by 6.1 points.

Using the quasi-random assignment of 760,000 children in U.S. military families, we show that neighborhood attributes experienced during childhood have powerful impacts on SAT scores, college-going and earnings. Twenty years of exposure in a 1 standard deviation "better" county raises SAT composite scores by 10 points (1.8 percentiles), raises college attendance by1.7 percentage points, earnings by 2.2 percentile points, and lowers EITC receipt by 10%. Impacts are three times more potent when we measure neighborhood quality at the zip code level:twenty years of exposure to a one (county level) standard deviation better zip code raises college going by 6.7 percentage points, SAT composite by 38 points and income percentile at age 25 by 6.1 points. The same locations benefit children with equal potency across race or sex [see Fig. 7]. The striking similarity in estimated neighborhood effects across groups has potentially important implications for understanding how the effects of place might influence group-based inequalities. Random assignment to place cuts the black-white gap in earnings from a hypothetical 4.8% down to the observed 3.7% or a 23% reduction.

Takeaways by Macro Roundup® AI

  1. Estimated neighborhood effects are three times more potent at the zip code level, where 20 years of exposure to a one county-level standard deviation better zip code raises college-going by 6.7 percentage points, SAT composite scores by 38 points, and age-25 income percentile by 6.1 points.
  2. The same locations benefit children with equal potency across race and sex, and random assignment to place cuts the black-white earnings gap from a hypothetical 4.8% to the observed 3.7%, a 23% reduction.

Related Articles:

AI Summary. US oil and gas extraction productivity nearly tripled in a decade, and crude output reached a record 13.3m barrels a day — 48% above Saudi Arabia — with under a third of the rigs. BloombergNEF projects production growth of 600,000 barrels a day on higher well productivity.

Catarina Saraiva, David Wethe, Mitchell Ferman, and Kevin Crowley Bloomberg
Date Posted:

Between 2012 and 2022, productivity in the American oil and gas sector rose by nearly a factor of 3, driving output to 13.3mm barrels/day of crude – 48% more than Saudi Arabia – while reducing rig count by a third.

Is oil and gas extraction now America's most productive industry?

Core argument: Productivity in US oil and gas extraction almost tripled in the 10 years ending in 2022, compared with a near-doubling in some tech-driven industries.

Productivity in the oil and gas extraction sector almost tripled in the 10 years ending in 2022, compared with a near-doubling in some tech-driven industries. The nation’s crude output has risen to a record 13.3 million barrels a day, 48% more than Saudi Arabia. All with less than a third of the rigs and far fewer workers than were needed 10 years ago. US oil production will grow by 600,000 barrels a day in 2025, about 50% more than this year's growth, due to higher well productivity, according to BloombergNEF.

Takeaways by Macro Roundup® AI

  1. Productivity in US oil and gas extraction almost tripled in the 10 years ending in 2022, compared with a near-doubling in some tech-driven industries.
  2. US crude output has risen to a record 13.3 million barrels a day, 48% more than Saudi Arabia, using less than a third of the rigs and far fewer workers than were needed 10 years ago.
  3. BloombergNEF projects US oil production will grow by 600,000 barrels a day in 2025, about 50% more than this year's growth, due to higher well productivity.

Related Articles:

  • U.S. Energy Production Exceeded Consumption By Record Amount In 2023 — U.S. energy production rose 4% to nearly 103 quadrillion British thermal units while consumption fell 1% to 94, leaving production exceeding consumption by 9 quadrillion British thermal units, the widest gap in records dating to 1949. Dry natural gas, crude oil, natural gas plant liquids, and renewables all reached record output.
  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.
  • United States Produces More Crude Oil Than Any Country, Ever — The United States has produced more crude oil than any nation at any time for six consecutive years, averaging 12.9m barrels per day in 2023 and surpassing the prior record of 12.3m barrels per day. Output fell to 5.0m barrels per day in 2008 before rising as producers applied hydraulic fracturing and horizontal drilling.

AI Summary. Public and private markets are converging, including liquidity in public and private credit, so assets in both can be either safe or risky. With 90% of active public-equity managers underperforming their index, global equity investors have become highly leveraged to Nvidia through passive investing, high index concentration, and a high share of foreign ownership.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk notes “90% of active managers of public equities underperform their index.” He warns that globally equity investors have become highly leveraged to Nvidia.

Are the lines between public and private, safe and risky, blurring?

Core argument: 90% of active managers of public equities underperform their index.

Public and private markets are converging, liquidity in public and private credit markets is converging. In a world where public and private markets are converging, public markets can be safe and risky, and private markets can be safe and risky. 90% of active managers of public equities underperform their index. Global equity investors have become highly leveraged to Nvidia because of the rise in passive investing, high concentration in equity markets, and a high share of foreign ownership

Takeaways by Macro Roundup® AI

  1. 90% of active managers of public equities underperform their index.
  2. Global equity investors have become highly leveraged to Nvidia because of the rise in passive investing, high concentration in equity markets, and a high share of foreign ownership.
  3. Public and private markets are converging, including liquidity in public and private credit markets, leaving both public and private markets able to be safe or risky.

Related Articles:

  • Updating Our Long-Term Return Forecast For US Equities to Incorporate the Current High Level of Market Concentration — The authors estimate the S&P 500 will deliver an annualized nominal total return of 3% over the next 10 years, roughly 1% in real terms, modeling long-term returns as a function of starting valuation, market concentration, frequency of economic contractions, corporate profitability, and interest rates. The index returned 13% annualized over the past decade, above its 11% long-term average.
  • US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat — US companies need about 7% earnings-per-share growth to deliver a normal 4% equity risk premium above the risk-free rate, versus about 3% for other developed markets, with the highest expectations embedded in technology and the largest US tech firms. Chinese companies could generate a 4% risk premium over Chinese bonds with no earnings growth.
  • Stock Market Concentration — Over 2014–2023 the 10 largest U.S. stocks averaged 19% of market capitalization while generating 47% of total economic profit, and by 2023 they were 27% of market capitalization and 69% of economic profit. The S&P 500 returned above its average when concentration was rising and below it when concentration was falling.

AI Summary. The rise of the populist right is not specific to the US, with Brexit preceding Trump and radical right parties in or near power across much of Europe. The left has measurably become the party of the upper echelons, leaving the right free to appeal to the lower-status majority.

John Burn-Murdoch Financial Times
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Win or lose, @jburnmurdoch argues Trumpism will outlast Trump throughout the West, pointing to a rise in support for right-leaning parties by voters with lower educational attainment and earnings in the UK and Europe as well as the U.S.

Is the populist right's rise a broader Western shift?

Core argument: The rise of the populist right and the elevated prominence of social issues did not originate in the US, with Brexit preceding Trump and radical right parties now in power or near it across much of Europe.

The rise of the populist right and elevated prominence of social issues is neither specific to the US nor even originated there. Brexit preceded Trump, and radical right politicians and parties are now in power, or close to it, across much of Europe. Looking at wider societal shifts across the west suggests this is no coincidence, but the result of strong headwinds. The left has measurably become the party of the upper echelons, giving the right free rein to appeal to the lower-status majority just as norms against reactionary politics break down and voters sour on the polished elite.

Takeaways by Macro Roundup® AI

  1. The rise of the populist right and the elevated prominence of social issues did not originate in the US, with Brexit preceding Trump and radical right parties now in power or near it across much of Europe.
  2. Wider societal shifts across the West suggest the populist right's simultaneous rise is no coincidence but the result of strong headwinds.
  3. The left has measurably become the party of the upper echelons, leaving the right free to appeal to the lower-status majority as norms against reactionary politics break down and voters sour on the polished elite.

Related Articles:

  • Trudeau Reverses Course on Immigration as Support Plunges — Canada plans to admit about 395,000 permanent residents, nearly 20% fewer than the 485,000 expected this year, and set its first target for temporary immigrants such as international students and foreign workers, cutting their numbers by roughly 446,000 over two years. The government projects the population would fall 0.2% in each of the next two years.
  • The Force Shaping Western Politics — The foreign-born share of the population has risen sharply since 1990 in nearly every large Western country. As mainstream politicians from the center-right to the left dismissed voters' concerns about immigration, many voters drifted toward extreme-right parties that promised to reduce it.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.

AI Summary. The Silver Bulletin presidential election forecast rates the race roughly a toss-up, with polling showing no sign of a late swing toward either candidate. Recent state polling favored the Democratic ticket in the "Blue Wall" states of the upper Midwest.

Nate Silver and Eli McKown-Dawson Silver Bulletin
Date Posted:

The most recent @NateSilver538 update showed Harris’s national lead down to 1.1pp from a peak of 3.5pp on October 2. The model gives Trump a 53.8% chance of winning the electoral college.

Is the presidential race still a toss-up in late polling?

Core argument: The Silver Bulletin presidential forecast update is favorable for Kamala Harris, with strong polling for her in the Blue Wall states.

Good update for Harris with some strong polling for her in the Blue Wall states. Not much sign of a last-minute swing in the race. We are likely locked into something roughly in the toss-up range, unless the last round of NYT/Siena polls weigh strongly toward one side. We’ll run another update in the afternoon if there’s a significant amount of polling.

Takeaways by Macro Roundup® AI

  1. The Silver Bulletin presidential forecast update is favorable for Kamala Harris, with strong polling for her in the Blue Wall states.
  2. Silver Bulletin sees little sign of a last-minute swing in the presidential race, which is likely locked into roughly toss-up territory.
  3. Silver Bulletin points to the last round of New York Times/Siena polls as what could weigh the race strongly toward one side.

Related Articles:

Monday, November 4, 2024

AI Summary. Using U.S. Census Bureau administrative data, the authors find that rising Chinese import penetration shifted jobs from manufacturing to services far more in high human capital areas, where within-firm industry switching occurs almost exclusively, producing a net positive employment effect; in low human capital, manufacturing-dependent areas, service gains barely offset manufacturing losses.

Nicholas Bloom, Kyle Handley, André Kurmann, and Philip Luck National Bureau of Economic Research
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.@I_Am_NickBloom et al find that areas with low human capital and high initial manufacturing share saw less services job growth to offset China shock manufacturing losses, explaining 50% of the 1997-2007 job growth gap vs. high human capital regions.

How does local human capital shape job reallocation from Chinese imports?

Core argument: Using confidential U.S. Census Bureau administrative data, the authors estimate that the China shock accounts for half of the one percentage point higher average annual job growth observed in high human capital areas.

Using confidential administrative data from the U.S. Census Bureau we revisit how the rise in Chinese import penetration has reshaped U.S. local labor markets. In high human capital areas (much of the West Coast and large cities more generally), job reallocation from manufacturing to services is higher than in low human capital areas with high manufacturing dependence (much of the South and the Midwest), primarily because within-firm reallocation and in particular industry switching occurs almost exclusively in high human capital areas. The positive effect on service jobs in high human capital areas robustly outweighs the negative effect on manufacturing jobs, implying a sizable net positive effect on total employment. In low human capital areas with high manufacturing dependence, by contrast, service job gains barely offset manufacturing job losses. Our estimates imply the China shock accounts for half of the one percentage point higher average annual job growth in high human capital areas that we observe in the data. The China shock thereby contributed to the changing geography of jobs in the U.S.

Takeaways by Macro Roundup® AI

  1. Using confidential U.S. Census Bureau administrative data, the authors estimate that the China shock accounts for half of the one percentage point higher average annual job growth observed in high human capital areas.
  2. In high human capital areas, including much of the West Coast and large cities, the positive effect of Chinese import penetration on service jobs outweighs the negative effect on manufacturing jobs, implying a sizable net positive effect on total employment.
  3. Within-firm reallocation, particularly industry switching, occurs almost exclusively in high human capital areas, while in low human capital areas with high manufacturing dependence service job gains barely offset manufacturing job losses.

Related Articles:

  • Manufacturing Jobs Boom Not Reaching Places Hit By The China Shock — U.S. manufacturing job growth since the pandemic is occurring disproportionately in counties least exposed to Chinese import competition in the 2000s, according to an analysis of federal employment and wage data. The counties hardest hit by that import competition still have fewer manufacturing jobs than before the pandemic.
  • What Happened To U.S. Manufacturing? — The authors find that about half of manufacturing job destruction from Chinese import competition comes from plant closures, while about 40% of the relative effect reflects continuing plants switching their primary activity from manufacturing to services such as research, design, management, and wholesale. Gains in services offset manufacturing losses, leaving overall employment unaffected.
  • Trading Places: Mobility Responses of Native and Foreign-Born Adults to the China Trade Shock — U.S. local labor markets more exposed to import competition from China saw substantially larger net reductions in their foreign-born populations, with no significant reduction among native-born residents. Within exposed areas, foreign-born and native-born workers had comparably sized declines in employment-to-population ratios.

AI Summary. Firms that both export and import account for 84% of US export value and 91% of import value, and employ more than 80% of all US manufacturing workers along with over half of workers in management, utilities, wholesale, transportation, information, and retail. These firms create over three-quarters of net new manufacturing jobs.

Fariha Kamal Briefing Book
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US firms that both export and import account for 84% of the total value of exports and 91% of the total value of imports. Broad-based tariffs impacting intermediate goods would hurt US export competitiveness. @farihakamal2011

Do broad import tariffs hurt US exporters and manufacturing employment?

Core argument: Firms that both export and import account for 84% of the total value of U.S. exports and 91% of the total value of imports.

Firms that both export and import goods account for 84% of the total value of exports and 91% of the total value of imports. Manufacturers that both export and import represent half of all exports and 40% of all imports, underscoring the complementarities between exports and imports in U.S. production. Exporter-importer firms have a diverse industrial footprint employing workers not only in the manufacturing sector but also across service-providing sectors. Exporter-importers employed more than 80% of all U.S. manufacturing workers and over half of all workers in the management, utilities, wholesale, transportation, information, and retail sectors. Exporter-importers’ substantial employment shares in services-providing industries reflect a shift by manufacturers to increasingly sell services. Exporter-importer firms are not only major employers but also the largest net job creators in the manufacturing sector. Over three-quarters of all net new jobs created in the manufacturing sector are by exporter-importer firms.

Takeaways by Macro Roundup® AI

  1. Firms that both export and import account for 84% of the total value of U.S. exports and 91% of the total value of imports.
  2. Exporter-importer firms employed more than 80% of all U.S. manufacturing workers and over half of all workers in the management, utilities, wholesale, transportation, information, and retail sectors.
  3. Exporter-importer firms are the largest net job creators in the U.S. manufacturing sector, accounting for over three-quarters of all net new manufacturing jobs.

Related Articles:

  • Fiscal, Macroeconomic, and Price Estimates of Tariffs Under Both Non-Retaliation and Retaliation Scenarios — The authors estimate the modeled tariff proposals would raise $1.2tn–$4.4tn over 10 years, or 0.3–1.2% of average GDP, with foreign retaliation cutting that revenue by 12–26%. They project consumer prices initially rise 1.2–5.1%, equal to $1,900–$7,600 of lost disposable income per household, with real GDP contracting 0.5–1.4% in the medium term.
  • EU to Impose Tariffs Up to 45% on Chinese Electric Vehicles — The European Union voted to impose tariffs of up to 45% on electric vehicles made in China, lasting five years, with China vowing to protect its companies. Chinese-made electric cars rose from around 3% to more than 20% of EU electric vehicle sales over three years, with Chinese brands accounting for about 8%.
  • Universal Tariffs are Universally Bad — Universal tariffs would raise costs for US manufacturers by taxing imported raw materials and equipment, with capital goods making up 28% of US imports and industrial supplies and materials another 22%. Intel imports Dutch-made extreme ultraviolet lithography machines costing hundreds of millions of dollars each with no US alternatives, so tariffs would add tens of millions to reshoring chip production.

AI Summary. Policy options for influencing the dollar fall into four overlapping categories: acting on the current account, acting on the financial account, monetary policy, and coordinated global policies affecting saving-investment balances. Because the US current account is driven by the economy's overall saving-investment balance, any policy affects the external imbalance only by shifting those decisions.

Chris Marsh and Jens Nordvig Money: Inside and Out
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.@GeneralTheorist and @jnordvig argue that the best approach to improving US manufacturing competitiveness “would be a combined fiscal consolidation in the US with real exchange rate adjustment agreed with trading partners.”

How can policymakers influence the dollar and the trade imbalance?

Core argument: Policy options for influencing the dollar fall into four overlapping categories: acting on the current account, acting on the financial account, monetary policy, and coordinated global policies addressing saving-investment balances alongside exchange rates.

The policy options for impacting the dollar fall into four categories, though there is overlap between these. First, acting on the current account (e.g., policies to impact imports and exports). Second, acting on the financial account (a Tobin tax, restrictions on financial inflows, or accumulation of foreign assets, for example.) Third, monetary policy (a dovish Fed and/or higher inflation target). Fourth, coordinated global policies to impact saving-investment balances along side exchange rates (e.g., fiscal consolidation to lower domestic saving alongside real exchange adjustment). It’s worth bearing in mind the driver of the US current account is the saving-investment balance of the economy as a whole—or low saving rate including due to loose fiscal policy. As such, any policy can only impact the external imbalance if it leads to a change in aggregate saving-investment decisions for the US economy as a whole or that of trading partners.

Takeaways by Macro Roundup® AI

  1. Policy options for influencing the dollar fall into four overlapping categories: acting on the current account, acting on the financial account, monetary policy, and coordinated global policies addressing saving-investment balances alongside exchange rates.
  2. The driver of the US current account is the saving-investment balance of the economy as a whole, including a low saving rate stemming in part from loose fiscal policy.
  3. Any policy can affect the US external imbalance only if it changes aggregate saving-investment decisions for the US economy as a whole or that of its trading partners.

Related Articles:

  • How to Manage the Dollar (Part I) — US dollar policy has been non-interventionist since the mid-1990s, roughly 30 years, making the current administration's expressed preference for a weaker dollar a departure that has not been spelled out explicitly. The stated rationale is that a weaker dollar would make American exports cheaper and help rebuild domestic manufacturing employment.
  • How to Manage the Dollar (Part II) — US dollar strength is comparable to its early-2000s peak, with cost-based real exchange rate measures such as unit labour costs as strong as at any point since the 1990s. The US current account deficit, about 3.3% of GDP, remains below prior highs, but its composition has shifted toward non-commodity goods as the shale boom erased the commodity deficit.
  • Why The West Should Be Paying More Attention To The Gold Price Rise — The rise in the gold price reflects more than traditional economic, financial, and geopolitical influences, capturing a broader phenomenon that is building secular momentum as a growing number of countries become involved. As it takes deeper root, it risks fragmenting the global system and eroding the international influence of the dollar and the US financial system.

AI Summary. The author estimates that under current law the US debt-to-GDP ratio rises from 98% to 125% by 2035, pushing Treasury yields up 1 to 1.7 percentage points. Applying the same estimates, the presidential candidates' proposals would raise yields by 1.25–2 and 1.6–2.7 percentage points respectively.

Jesper Rangvid Rangvid's Blog
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Jesper Rangvid uses a base-case estimate that each 1% increase in debt/GDP drives a 3.5bps rise in long-term Treasury yields and forecasts a 1pp rise in yields by 2035 under current law, vs. 1.25pp under Harris’s proposals, and 1.6pp under Trump’s.

How much would rising government debt push up Treasury yields?

Core argument: Under current law, the US debt-to-GDP ratio is projected to rise from 98% to 125% by 2035, an increase estimated to raise yields by 1 percentage point using a 3.5 basis-point-per-point effect and 1.7 points using 6 basis points.

For my analysis, I adopt the consensus estimate of a 3.5 basis-point increase in yields as a base case and a 6 basis-point increase as a pessimistic scenario [for each one-percentage-point rise in the government debt-to-GDP ratio], the latter may be conservative. I then apply these estimates to the debt changes implied by current law and the candidates’ policies. Under current law, the debt-to-GDP ratio is projected to rise from 98% today to 125% by 2035. This increase alone would drive yields up by 1 percentage point (relative to a scenario with no change in debt) under the 3.5 basis-point scenario, and by 1.7 percentage points under the 6 basis-point scenario. The candidates’ proposals would raise yields even further. Based on Harris’s proposals, yields are projected to increase by 1.25 percentage points relative to the current baseline by 2035 if applying the 3.5 basis-point effect, and by over 2 percentage points with the 6 basis-point effect. For Trump’s proposals, these figures are 1.6 and 2.7 percentage points, respectively.

Takeaways by Macro Roundup® AI

  1. Under current law, the US debt-to-GDP ratio is projected to rise from 98% to 125% by 2035, an increase estimated to raise yields by 1 percentage point using a 3.5 basis-point-per-point effect and 1.7 points using 6 basis points.
  2. Trump's proposals are projected to raise yields by 1.6 percentage points relative to the current baseline by 2035 under the 3.5 basis-point estimate and 2.7 points under the 6 basis-point estimate.
  3. Harris's proposals are projected to raise yields by 1.25 percentage points relative to the current baseline by 2035 under the 3.5 basis-point estimate and over 2 points under the 6 basis-point estimate.

Related Articles:

  • The Fiscal Impact of the Harris and Trump Campaign Plans — The national debt stands at 99% of Gross Domestic Product and is projected to reach 125% by 2035 under current law, exceeding the record 106% share set in 1946 within three years. Central estimates put debt at 134% of GDP under the Harris plan and 143% under the Trump plan.
  • US Fiscal Outlook Starting to Play a Role for Long-Term Interest Rates — Long-term US interest rates are rising even as markets price in five Federal Reserve rate cuts over the coming 12 months and oil prices fall, disconnecting long rates from those drivers. This pattern suggests long rates are being pushed up by emerging concerns about US fiscal sustainability.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.

AI Summary. Hitachi Energy, the world's largest transformer maker, says the industry is overwhelmed and cannot keep pace with demand for grid equipment, with utilities that have not pre-reserved units now facing waits of three to four years versus six to eight months previously. Demand has been strained partly by data centres running generative artificial intelligence.

Harry Dempsey Financial Times
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The lead time for power transformers has historically been 6-8 months, but “with supplies strained by the growing needs of data centers used for generative artificial intelligence,” new orders now potentially have a lead time of 3-4 years.

How long must utilities now wait for grid transformers?

Core argument: Utilities that have not already reserved a transformer now face waits of three to four years, up from the six to eight months typical when manufacturers suffered a years-long glut, according to Hitachi Energy chief executive Andreas Schierenbeck.

The world’s largest producer of transformers has warned its industry is “overwhelmed” and unable to meet exploding demand for grid equipment, threatening delays to vital infrastructure projects that would boost the share of renewable energy across the globe. Andreas Schierenbeck, chief executive of Hitachi Energy, a rapidly growing division at the heart of Japan’s third-most valuable public company, said transformer manufacturers would be hard-pressed to boost output quickly enough to meet demand to upgrade grids, with supplies strained by the growing needs of data centres used for generative artificial intelligence. Transformers had long been readily available within six to eight months when manufacturers suffered from a glut for years, but demand in the $48bn market has suddenly rocketed. Its size is expected to reach $67bn by 2030, according to estimates by consultancy Rystad Energy. Utilities wanting to buy the key piece of electrical infrastructure would now have to wait three to four years if they have not reserved one already, said Schierenbeck.

Takeaways by Macro Roundup® AI

  1. Utilities that have not already reserved a transformer now face waits of three to four years, up from the six to eight months typical when manufacturers suffered a years-long glut, according to Hitachi Energy chief executive Andreas Schierenbeck.
  2. The transformer market, currently $48bn, is expected to reach $67bn by 2030, according to Rystad Energy estimates, with supplies strained by the growing needs of data centres used for generative artificial intelligence.
  3. Andreas Schierenbeck said transformer manufacturers are "overwhelmed" and would be hard-pressed to raise output quickly enough to meet demand for grid upgrades, threatening delays to projects that would boost the share of renewable energy globally.

Related Articles:

  • Electravision — The fossil fuel share of global primary energy is falling about 0.40% per year, matching the pace of decarbonization during the 1973–1988 nuclear buildout, though total carbon dioxide emissions have not declined because energy consumption keeps rising. Renewable energy is used almost exclusively for the electricity grid, with little penetration in industry and transport.
  • Electricity 2024 — More than 8,000 data centers operate globally, with about 33% in the United States, 16% in Europe, and close to 10% in China. US data center electricity use is projected to rise from roughly 200 TWh in 2022, about 4% of US electricity demand, to almost 260 TWh, or 6% of total demand.
  • Electricity Grids and Secure Energy Transitions — Under a scenario based on announced government pledges, global electricity demand is projected to grow 2.7% per year, more than doubling from just under 25,000 terawatt-hours to nearly 54,000 terawatt-hours by 2050. Hydrogen production via electrolysis and electric vehicles account for more than half of that projected growth.

AI Summary. Passive equity mutual funds and exchange-traded funds have drawn $2.8tn of inflows while actively managed funds saw $3tn of outflows, and passive ownership of the typical S&P 500 firm rose from 18% to 26%. A company's passive ownership share matters far less for valuation multiples than fundamental attributes.

David Kostin, Ben Snider, Ryan Hammond, Jenny Ma and Daniel Chavez Goldman Sachs
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Over the past decade, passive equity funds and ETFs have seen $2.8T of inflows relative to $3T outflows from actively managed funds. The median S&P 500 firm passive ownership share has risen to 26%.

Does rising passive ownership drive stock valuations and performance?

Core argument: Passive equity mutual funds and ETFs drew $2.8 trillion of inflows over the past decade, while actively managed funds saw $3 trillion of cumulative outflows.

During the past decade, passive equity mutual funds and ETFs have seen $2.8 trillion of inflows compared with $3 trillion of cumulative outflows from actively managed funds. Alongside passive equity inflows, the share of passive ownership for the typical S&P 500 firm has also increased, rising from 18% two decades ago to 26% today. The intensity of passive ownership within the S&P 500 varies across sectors and across market cap. For stock pickers the share of passive ownership of a company is much less important for valuation multiples than fundamental attributes. Stocks with the highest share of passive ownership have not consistently outperformed stocks with the lowest share.

Takeaways by Macro Roundup® AI

  1. Passive equity mutual funds and ETFs drew $2.8 trillion of inflows over the past decade, while actively managed funds saw $3 trillion of cumulative outflows.
  2. Passive ownership of the typical S&P 500 firm rose from 18% two decades ago to 26%, with intensity varying across sectors and market cap.
  3. For stock pickers, a company's share of passive ownership matters much less for valuation multiples than fundamental attributes, and stocks with the highest passive ownership share have not consistently outperformed those with the lowest.

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  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat — US companies need about 7% earnings-per-share growth to deliver a normal 4% equity risk premium above the risk-free rate, versus about 3% for other developed markets, with the highest expectations embedded in technology and the largest US tech firms. Chinese companies could generate a 4% risk premium over Chinese bonds with no earnings growth.

AI Summary. Official UK data shows adulthood milestones arriving later: most Britons now marry in their early thirties, the average first-time home buyer is a record 34, and fertility rates for women in their twenties are the lowest since records began in 1964. Young women are pulling ahead in education and professional attainment.

Amy Borrett Financial Times
Date Posted:

UK official data shows most Britons today will marry in their early thirties, almost 10 years later than their grandparents. The fertility rate for 20-something British women has fallen to its lowest level since 1964.

Are the milestones of adulthood arriving later for young people?

Core argument: Official UK data shows first-time home buyers are now on average 34, an all-time high, while most Britons marry in their early thirties, almost a decade later than their grandparents' generation.

The major milestones of adulthood are already happening later in life. Official data shows that most Britons today will marry in their early thirties — almost a decade later than their grandparents’ generation. Meanwhile, the average age of first-time home buyers has hit an all-time high of 34, while fertility rates for women in their twenties are at the lowest levels since records began in 1964, according to figures published this week. There are signs that the growing economic gap between young men and women is filtering through to social views and behaviour. Data shows that on average young women are pulling ahead in terms of education and professional attainment. Young men are about twice as likely to be teetotal as the average adult following a sharp rise in non-drinking over the past year, according to exclusive data from a 2024 survey of more than 5,000 adults by the charity Drinkaware. A third of men aged 18 to 24 said they never drink alcohol, compared with just 19% of their female peers. Young men are also less likely to smoke or vape than women, reversing a long-term trend, and about twice as likely to have voted for the Conservatives or Reform at the last election.

Takeaways by Macro Roundup® AI

  1. Official UK data shows first-time home buyers are now on average 34, an all-time high, while most Britons marry in their early thirties, almost a decade later than their grandparents' generation.
  2. Fertility rates for British women in their twenties are at the lowest levels since records began in 1964.
  3. A third of British men aged 18–24 say they never drink alcohol versus 19% of their female peers, according to a 2024 Drinkaware survey of more than 5,000 adults, with young men also about twice as likely to have voted Conservative or Reform at the last election.

Related Articles:

  • Young Adults in the U.S. Are Reaching Key Life Milestones Later Than in the Past — Pew Research Center analysis of Census Bureau data finds 21-year-olds in the US are less likely than their counterparts four decades earlier to have a full-time job, be financially independent, live on their own, be married, or have a child. Among 21-year-olds, 39% worked full time versus 64% four decades earlier, and a quarter were financially independent versus 42%.
  • The Marriage Paradox: Understanding And Remedying The Paradoxical Place Of Marriage In America — The U.S. marriage rate has fallen more than 60% since 1970, from 85.9 to 30.5 marriages per 1,000 unmarried Americans aged 15 and older, and the share of adults who are married has dropped from 72% to about 50%. Demographers project roughly one in three young adults may never marry.
  • The Global Fertility Crisis Is Worse Than You Think — Adjusting United Nations figures for lower recorded births, the author estimates the global fertility rate was 2.18, below the 2.21 replacement threshold. Population is not yet falling because women born in the 1990s and 2000s are having children while older generations live longer, so births still exceed deaths, with a projected peak in about 30 years.