Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “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 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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, November 12, 2024

AI Summary. Higher-than-average long-term (3–5 year) earnings growth expectations consistently predict low future stock returns, according to research, making such forecasts a contrarian indicator. The authors argue long-term forecasts reflect irrational optimism and pessimism, while short-term forecasts outside recessions convey relatively accurate information about future cash flows.

Luke Burke and Daniel Rasmussen Verdad
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.@verdadcap cites evidence from Shleifer and argues “Although the short-term forecasts, outside of recessions, are decent, the longer-term forecasts are so bad as to be a contrarian indicator.”

Do high long-term earnings growth forecasts predict low stock returns?

Core argument: Bordalo, Gennaioli, La Porta, O'Brien, and Shleifer find that higher-than-average long-term growth expectations, 3–5 years out, consistently predict low future stock returns.

Although the short-term forecasts, outside of recessions, are decent, the longer-term forecasts are so bad as to be a contrarian indicator. A paper by the powerhouse team of Bordalo, Gennaioli, La Porta, O’Brien, and Shleifer found that higher than average long-term growth expectations (3-5 years out) consistently predict low future stock returns. Long-term forecasts seem to reflect animal spirits, irrational optimism and pessimism about future events that no one can accurately predict. In contrast, short-term forecasts seem to provide real and relatively accurate information about future cash flows.

Takeaways by Macro Roundup® AI

  1. Bordalo, Gennaioli, La Porta, O'Brien, and Shleifer find that higher-than-average long-term growth expectations, 3–5 years out, consistently predict low future stock returns.
  2. Short-term forecasts, outside of recessions, appear to provide real and relatively accurate information about future cash flows, while long-term forecasts seem to reflect animal spirits and irrational optimism or pessimism about events no one can accurately predict.

Related Articles:

  • Long-Term Expectations and Aggregate Fluctuations — When stock analysts' forecasts of long-term earnings growth for S&P 500 firms are high by historical standards, their forecasts of short- and long-term profits are systematically disappointed later, according to the authors. The authors estimate that a 1 standard deviation rise in these long-term forecasts is followed by an investment boom that reverses two years later.
  • Finance Without Exotic Risk — Using analyst earnings forecast errors and revisions, the authors construct firm-level "expectations-based returns" and find that predictable movements in non-rational expectations of earnings growth, rather than exotic risk factors, account for much of the cross-sectional return spreads in value, investment, size, and momentum. Growth stocks underperform on average because optimism about them falls more often than it rises.
  • Real Credit Cycles — Managers' profit expectations overreact to current conditions, producing excessive optimism in booms and undue pessimism in downturns, which the authors link to credit and investment overexpansion followed by tighter credit and higher defaults. In their model, a 1.5% drop in productivity growth generates a large rise in credit spreads.

AI Summary. The US share of global semiconductor manufacturing capacity fell from 37% in 1990 to 12% in 2020, a shift the article attributes partly to foreign industrial policy rather than market forces alone. Industry estimates put fab operating costs 30% higher in the US than in Taiwan or South Korea, largely reflecting foreign subsidies.

Chad Bown and Dan Wang Journal of Economic Perspectives
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In 2020 operating a fab in the US cost 30% more than in Taiwan and South Korea and 50% more than in China. The Semiconductor Industry Association estimated that 40–70% of that cost differential was due to relatively higher foreign government subsidies.

Did foreign subsidies drive the decline in US chipmaking capacity?

Core argument: The US share of global semiconductor manufacturing capacity fell from 37% in 1990 to 12% in 2020, with manufacturing increasingly concentrated in Asia.

The US share of global semiconductor manufacturing capacity fell dramatically—from 37% in 1990 to 12% in 2020. The increasing concentration of manufacturing in Asia was not due to only market forces: foreign industrial policy continued to play a role. The Semiconductor Industry Association, for example, argued in 2020 that it was 30% more costly to operate a fab in the United States relative to Taiwan or South Korea and up to 50% more costly than in China. The SIA also estimated that 40–70% of that cost differential was due to relatively higher foreign government subsidies.

Takeaways by Macro Roundup® AI

  1. The US share of global semiconductor manufacturing capacity fell from 37% in 1990 to 12% in 2020, with manufacturing increasingly concentrated in Asia.
  2. The Semiconductor Industry Association argued in 2020 that operating a fab in the United States was 30% more costly than in Taiwan or South Korea and up to 50% more costly than in China.
  3. The Semiconductor Industry Association estimated that 40–70% of that cost differential stemmed from relatively higher foreign government subsidies, indicating that concentration in Asia was not driven by market forces alone.

Related Articles:

  • TSMC’s Arizona Chip Production Yields Surpass Taiwan’s in Win for US Push — Taiwan Semiconductor Manufacturing Co. reports that the share of usable chips produced at its Phoenix, Arizona plant is about 4 percentage points higher than at comparable factories in Taiwan. Yield is a critical industry measure because it determines whether companies can cover the enormous costs of a chip plant.
  • With US Chips Act Money Mostly Divvied Up, the Real Test Begins — The US Chips Act is a bet that Intel, Micron, Taiwan Semiconductor Manufacturing, and Samsung can return advanced chip production to the US, with an explicit goal of making a fifth of the world's most advanced processors by 2030, up from roughly zero. Nearly 100 companies have pledged about $400bn in US facilities.
  • The Chips Act Has Been Surprisingly Successful So Far — The US government has spent over half of its $39bn in Chips Act semiconductor incentives, and chip companies and supply chain partners have announced $327bn of investments over the next 10 years, according to Semiconductor Industry Association calculations. US data show a 15-fold increase in construction of computing and electronics manufacturing facilities.

AI Summary. The US goods trade deficit with China equals about 1% of GDP, while the overall US goods deficit has run near 4% of GDP since after the 2008 financial crisis. Eliminating it would raise domestic goods output, likely at the expense of services, but at most would return manufacturing employment shares to levels of a decade or two earlier.

Martin Wolf Financial Times
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Martin Wolf argues eliminating the US goods trade deficit of ~4% of GDP would at most bring manufacturing “employment shares to the levels of a decade or two ago.”

Would eliminating the goods trade deficit meaningfully restore manufacturing employment?

Core argument: The US bilateral goods trade deficit with China equals only 1% of GDP, while the overall US goods deficit has run around 4% of GDP since just after the 2008 financial crisis.

The bilateral US trade deficit in goods with China is only 1% of GDP. The overall US deficit in goods has been around 4% of GDP since just after the 2008 financial crisis. If that were eliminated (probably impossible, given US competitiveness in services and the macroeconomic forces causing US trade deficits), it would indeed increase domestic output of goods (presumably at the expense of services). But the very most it is likely to do is to bring employment shares to the levels of a decade or two ago.

Takeaways by Macro Roundup® AI

  1. The US bilateral goods trade deficit with China equals only 1% of GDP, while the overall US goods deficit has run around 4% of GDP since just after the 2008 financial crisis.
  2. Eliminating the US goods deficit is probably impossible given US competitiveness in services and the macroeconomic forces that cause US trade deficits.
  3. Eliminating the US goods deficit would raise domestic goods output, presumably at the expense of services, but at most would return employment shares to levels of a decade or two ago.

Related Articles:

  • Manufacturing Jobs Have Recovered, But Not Everywhere — U.S. manufacturing employment recovered the 650,000 jobs lost in the 2020 recession, rising above 12.9m workers and exceeding the pre-pandemic level of 12.8m — the first such post-recession recovery since the late 1970s. Even so, manufacturing's share of private-sector employment fell from 31% in 1970 to 9.7%.
  • 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.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.

AI Summary. Incoming data—above-trend growth, strong retail sales and durable goods, low jobless claims, rising average hourly earnings, falling default rates, and record corporate profits—are inconsistent with the view that the US labor market is cooling. The author argues tailwinds including record stock prices, tight credit spreads, and the artificial intelligence build-out could drive a sharp rebound in job growth.

Torsten Sløk Apollo
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Torsten Sløk argues that the economic expansion is robust and that anticipated lower taxes for domestic manufacturers and deregulation might drive “a dramatic increase in job growth in November.”

Does incoming data contradict the view that the labor market is cooling?

Core argument: Incoming data on above-trend GDP growth, strong retail sales and durable goods, low jobless claims, and rising average hourly earnings are inconsistent with the narrative that the US labor market is cooling.

The narrative that the labor market is cooling is inconsistent with the continued strength seen in the incoming data for above-trend GDP growth, strong retail sales, strong durable goods, low jobless claims, and rising average hourly earnings. In addition, default rates continue to decline, corporate profits are at all-time highs, weekly forward profit margins are at record highs, and US household balance sheets are in excellent shape. In short, the US economy remains incredibly strong. Combined with tailwinds to growth from record-high stock prices, tight credit spreads, M&A/issuance markets rebounding, the AI/data center boom, the Chips Act, the IRA, the Infrastructure Act, and lower taxes for domestic manufacturers and deregulation likely coming, the bottom line is that we could see a dramatic increase in job growth in November, including a reversal of the weather and strike effects that were pushing down nonfarm payrolls in October.

Takeaways by Macro Roundup® AI

  1. Incoming data on above-trend GDP growth, strong retail sales and durable goods, low jobless claims, and rising average hourly earnings are inconsistent with the narrative that the US labor market is cooling.
  2. Declining default rates, corporate profits at all-time highs, record weekly forward profit margins, and healthy US household balance sheets point to a US economy that remains strong.
  3. Record-high stock prices, tight credit spreads, rebounding M&A and issuance markets, the AI and data center boom, the Chips Act, the IRA, and the Infrastructure Act could drive a sharp increase in November job growth, reversing October's weather and strike effects.

Related Articles:

  • Why is the U.S. GDP Recovering Faster Than Other Advanced Economies? — The U.S. output advantage over other advanced economies is attributed mainly to faster labor productivity growth and secondarily to hours worked per employee. Rigid foreign labor markets and job-retention policies kept workers attached to firms producing below capacity, while the U.S. saw about 3x more sectoral worker reallocation and a surge in new firm formation.
  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • Will Trump’s Win (Eventually) Lead to *Lower* Long-Term Interest Rates? — The author argues the inflation of 2021–2022 could have been avoided only at the cost of a global depression, and that historical elections show voters do not reward incumbents who preside over disinflationary downturns. Many in the U.S. may nonetheless come to treat the episode as a cautionary tale about responding too aggressively to economic downturns.

AI Summary. The US has set out a road map to triple nuclear power capacity by 2050, adding 200 gigawatts through new reactors, plant restarts and upgrades to existing facilities, with 35 gigawatts of new capacity targeted within about a decade. Demand is climbing for nuclear as a round-the-clock source of carbon-free power.

Jennifer Dlouhy Bloomberg
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The Biden administration is rolling out a plan to bring 200 gigawatts of nuclear energy online by 2050 via construction of new reactors, plant restarts and upgrades to existing facilities.

Can the US triple its nuclear power capacity by 2050?

Core argument: The Biden administration's road map calls for tripling US nuclear power capacity by 2050, adding 200 gigawatts through new reactor construction, plant restarts, and upgrades to existing facilities.

President Joe Biden’s administration is setting out plans for the US to triple nuclear power capacity by 2050, with demand climbing for the technology as a round-the-clock source of carbon-free power. Under a road map being unveiled Tuesday, the US would deploy an additional 200 gigawatts of nuclear energy capacity by mid-century through the construction of new reactors, plant restarts and upgrades to existing facilities. In the short term, the White House aims to have 35 gigawatts of new capacity operating in just over a decade.

Takeaways by Macro Roundup® AI

  1. The Biden administration's road map calls for tripling US nuclear power capacity by 2050, adding 200 gigawatts through new reactor construction, plant restarts, and upgrades to existing facilities.
  2. The White House aims to have 35 gigawatts of new US nuclear capacity operating in just over a decade.
  3. Demand for nuclear power is climbing as a round-the-clock source of carbon-free electricity.

Related Articles:

  • Three Mile Island’s Nuclear Plant to Reopen, Help Power Microsoft’s AI Centers — Constellation Energy will spend about $1.6bn to restart the undamaged reactor at Pennsylvania's Three Mile Island nuclear plant, which closed in 2019, and has signed a 20-year agreement to sell the power to Microsoft. The deal reflects the scale of round-the-clock carbon-free electricity sought for artificial intelligence data centers.
  • Nuclear Power Is Hard. A Climate-Minded Billionaire Wants to Make It Easier — Start-up TerraPower has begun building a sodium-cooled nuclear reactor designed to be smaller and cheaper than conventional water-cooled plants, with completion expected no earlier than 2030 and the design not yet approved by the Nuclear Regulatory Commission. The company says the reactors should ultimately generate electricity at half the cost of traditional nuclear plants.
  • 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.

AI Summary. The European Union plans to give member states more flexibility to redirect cohesion funds — about €392bn aimed at reducing economic inequality between member countries — toward defence industries and military mobility projects such as reinforcing roads and bridges for tanks. The change would permit funding for weapons and ammunition production.

Paola Tamma Financial Times
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The EU will allow €392B, originally aimed at reducing economic inequality between EU countries, to be used by member countries “to support their defense industries and military mobility projects” @FT

Can regional development funds be redirected to defence spending?

Core argument: Brussels is loosening rules on roughly €392bn of EU cohesion funds for 2021–2027 — about a third of the bloc's common budget, aimed at reducing economic inequality between member states — potentially redirecting tens of billions of euros to defence and security.

Brussels is changing its spending policies to potentially redirect tens of billions of euros to defence and security. The policy shift would apply to about a third of the bloc’s common budget, or some €392bn from 2021 to 2027, money that is aimed at reducing economic inequality between EU countries. Only about 5% of these so-called cohesion funds have been spent to date, with the biggest beneficiaries, including Poland, Italy, and Spain, spending even less. Under existing rules, these funds cannot be used to purchase defence equipment or directly fund the military, but investment in so-called dual-use products such as drones is allowed. Capitals of member states will be told in coming weeks that they will now have more flexibility under the rules to allocate cohesion funds to support their defence industries and military mobility projects such as reinforcing roads and bridges to allow the safe passage of tanks. This will include permitting funding for boosting the production of weapons and ammunition.

Takeaways by Macro Roundup® AI

  1. Brussels is loosening rules on roughly €392bn of EU cohesion funds for 2021–2027 — about a third of the bloc's common budget, aimed at reducing economic inequality between member states — potentially redirecting tens of billions of euros to defence and security.
  2. Only about 5% of the EU's cohesion funds have been spent to date, with the biggest beneficiaries, including Poland, Italy and Spain, spending even less.
  3. Member states will be told they have more flexibility to use cohesion funds for defence industries, weapons and ammunition production, and military mobility projects such as reinforcing roads and bridges for the safe passage of tanks.

Related Articles:

  • The US and Its Allies Face a $10 Trillion Reckoning in the Race to Rearm — World defense spending reached a record $2.2tn, and security officials say military budgets may need to reach Cold War levels of as high as 4% of economic output to deliver on NATO's plans. Bloomberg Economics calculates that US and Group of Seven allies hitting that level would mean over $10tn in additional commitments over a decade.
  • The ‘Eye-Watering’ Cost of Ending the Peace Dividend — Sweden announced plans to raise defense spending by more than 25% to reach NATO's target of 2% of GDP, a level met by only 11 of the alliance's 31 members. Meeting such commitments requires a major reordering of budget and electoral priorities, as when Denmark funded higher spending by cancelling a public holiday.
  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.

Wednesday, November 13, 2024

AI Summary. A study of China's Ming-to-Qing dynastic transition finds elite families in Central China lost influence in the short run but their descendants regained and tightened their hold on power under the new dynasty, even as the hardest-hit regions stayed worse off. The authors attribute the recovery to emphasis on portable civil-service exam skills.

Carol Shiue and Wolfgang Keller National Bureau of Economic Research
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Carol Shiue and Wolfgang Keller find that descendants of elites that lost status after the fall of the Ming Dynasty in 1644 regained elite status in subsequent generations by achievement in civil service exams, “the ultimate gateway to power.”

How do elite families regain power after regime collapse?

Core argument: Local Ming elite families in Central China lost influence in the short run after the dynasty's fall in 1644, but their descendants recovered and tightened their grip on power as elites of the new Qing Dynasty (1644–1911).

This paper documents persistence in the power of elite families in Central China despite dynastic change. We study the impact of the fall of the Ming Dynasty (1368-1644) on couples and theirdescendants, and present evidence on the response of multigenerational family lines to a big shock. Local Ming elites suffered a decline in influence in the short run, but inthe long-run their descendants recovered and tightened their grip on power as the elites of the new Qing Dynasty (1644-1911). In contrast to the recovery of family lines, the fall of Ming had a more persistently negative impact on the regions that historically were most strongly negatively affected by the shock. First-generation couples in treated villages experienced higher levels of loss in terms of lives, land, and property compared to other couples. Compared to land and property, the skills required to pass the keju [civil service exam] are a relatively portable form of wealth. We hypothesize that disproportionate trauma for first-generation treated couples led to a stronger emphasis on the keju, which these families transmitted from one generation to the next.

Takeaways by Macro Roundup® AI

  1. Local Ming elite families in Central China lost influence in the short run after the dynasty's fall in 1644, but their descendants recovered and tightened their grip on power as elites of the new Qing Dynasty (1644–1911).
  2. The fall of the Ming had a more persistently negative impact on the regions historically most strongly affected by the shock than on family lines, which recovered across generations.
  3. First-generation couples in treated villages lost more lives, land, and property than other couples, and the authors hypothesize this disproportionate trauma led families to emphasize the keju civil service exam, whose skills are a relatively portable form of wealth.

Related Articles:

  • The Inheritance Of Social Status: England, 1600 to 2022 — Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
  • For Whom the Bell Curve Tolls: A Lineage of 400,000 English Individuals 1750-2020 shows Genetics Determines Most Social Outcomes — A study of 402,000 English individuals across 1750–2020 estimates an intergenerational occupational status correlation of 0.88 and a genetic correlation between spouses of 0.76, which the authors interpret as a strong genetic basis for the persistence of social status. The authors argue that highly assortative mating around status genetics limits what policy can do to raise social mobility.
  • The Grandchildren of China’s Pre-Revolutionary Elite Are Unusually Rich — A survey of 36,000 Chinese residents found that grandchildren of China's pre-revolutionary elite, born between 1966 and 1990, were 6% more likely to finish high school and earned 12% more than their contemporaries, exceeding Communist Party members by 2%. An earlier generation, the children of the old elite, earned 5% less than other Chinese.

AI Summary. Real wage growth in no part of the income distribution outpaced its 2012-2020 rate during the Biden presidency, and the median individual's wage change was weaker than any period in 30 years except the Great Recession. Median growth in total income after taxes and transfers turned deeply negative, partly reflecting the timing of pandemic stimulus.

J. Zachary Mazlish A Zibaldone
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Zach Mazlish argues that households suffered a 1.7% median annualized decline in post-tax real income during Biden’s term, far more negative than alternative metrics of the real income trends, helping to explain the degree of discontent with Biden.

Did inflation leave the median voter worse off?

Core argument: In no part of the income distribution did wages grow faster during Biden's presidency than in 2012–2020, a gap visible in the raw data and starker after compositional adjustment, with median income change well below its 2012–20 run-rate.

Inflation did make the median voter poorer during Biden's term. In no part of the income distribution did wages grow faster while Biden was President than they did 2012-2020. This is true in the raw data, and even more stark after compositional adjustment. In particular, the change in median incomes was well below its 2012-20 run-rate. But, the change in median wages is not what matters; it is the median change in wages that does. And this metric was even weaker under Biden: lower than any period in the last 30 years other than the Great Recession. People do not feel wages, they feel total income. And median growth in total income — post taxes and transfers — was not just historically low: it collapsed and was deeply negative from 2021 onwards. Much of this decline is due to timing of pandemic stimulus and even less the “fault of Biden” than other things.

Takeaways by Macro Roundup® AI

  1. In no part of the income distribution did wages grow faster during Biden's presidency than in 2012–2020, a gap visible in the raw data and starker after compositional adjustment, with median income change well below its 2012–20 run-rate.
  2. The median change in wages — rather than the change in median wages — was weaker under Biden than in any period of the last 30 years other than the Great Recession.
  3. Median growth in total income after taxes and transfers collapsed and was deeply negative from 2021 onward, a decline attributed largely to the timing of pandemic stimulus rather than to Biden.

Related Articles:

  • Real Wage Growth: The Post-Pandemic Labor Market and Beyond — Real wage gains for non-managerial workers, roughly 80% of the private workforce, exceeded both those of all workers and projections based on pre-pandemic trends, which is attributed to labor market tightness and strong demand in low-wage sectors. This compression of wage inequality has persisted even as the labor market cooled and unemployment rose above 4%.
  • Has Pay Kept Up With Inflation? — All four measures of typical and aggregate pay have grown since 2019 when adjusted using the personal consumption expenditures price index, but show smaller increases in three measures and a decline in one when adjusted using the consumer price index. This pattern of smaller gains under consumer price index adjustment holds across time periods.
  • The Unexpected Compression: Competition at Work in the Low Wage Labor Market — Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.

AI Summary. Federal Reserve cuts to the federal funds rate target range were accompanied by falling short-term Treasury bill yields but rising longer-term yields, with the 10-year Treasury yield climbing from 3.63% to 4.42%. Deficit-increasing proposals from both presidential campaigns likely exacerbated the rise in longer-term yields.

CRFB Staff Committee for a Responsible Federal Budget
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Despite 75bps of FFR cuts since September, long-term yields have risen 79bps, including a 21bp rise as election results came in. @MarcGoldwein argues that worries about expanding deficits on top of high existing debt are driving the divergence.

Why are long-term Treasury yields rising as the Fed cuts rates?

Core argument: The 10-year Treasury yield rose from 3.63% on September 16 to 4.42%, moving opposite the federal funds rate after the FOMC cut its target range by 50 basis points in mid-September and 25 basis points in early November to 4.50–4.75%.

After holding the federal funds rate target range at 5.25 to 5.50 percent for over a year, the Federal Open Market Committee (FOMC) cut the range by 50 basis points to 4.75 to 5.00 percent in mid-September and by another 25 basis points to 4.50 to 4.75 percent in early November. As expected, yields on short-term Treasury bills fell in kind, with the 3-month yield dropping from 4.87 percent on September 16 to 4.54 percent today. But surprisingly, longer-term yields moved in the opposite direction of the federal funds rate, with the 10-year Treasury yield rising from 3.63 percent on September 16 to 4.42 percent today. The recent rise in yields has likely been exacerbated by the election and the fiscally irresponsible proposals by both presidential campaigns. As both candidates continued to add deficit-increasing proposals to their campaign agendas, yields rose. And the 10-year yield increased significantly by 21 basis points as election results came in, from the time polls started closing to when the election was called. (The 10-year yield has since fallen by 5 basis points, mainly due to the Fed announcing a 25-basis point cut).

Takeaways by Macro Roundup® AI

  1. The 10-year Treasury yield rose from 3.63% on September 16 to 4.42%, moving opposite the federal funds rate after the FOMC cut its target range by 50 basis points in mid-September and 25 basis points in early November to 4.50–4.75%.
  2. Short-term Treasury yields fell in line with the Fed's cuts, with the 3-month yield dropping from 4.87% on September 16 to 4.54%, after the FOMC had held the range at 5.25–5.50% for over a year.
  3. The rise in long-term yields has likely been exacerbated by the election and deficit-increasing proposals from both presidential campaigns, with the 10-year yield rising 21 basis points as election results came in and falling 5 basis points after the Fed's 25-basis point cut.

Related Articles:

AI Summary. Among male high school seniors, party identification once differed little by college plans, but young men not planning to attend college have become increasingly likely to identify as Republicans, reaching 77% versus 59% of those planning to attend. Young men with poorer high school grades have also shifted toward Republicans, a pattern not seen among young women.

Jean Twenge Generation Tech
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Men aged 18-29 favored Biden by 15pp in 2020 but went for Trump by 13pp in 2024. @jean_twenge notes that B/C high school students are increasingly Republican, and argues “young men who feel like they’re losing are now more likely to be Republicans.”

Are young men without college plans shifting toward Republicans?

Core argument: By 2023, 77% of male high school seniors who did not plan to attend college identified as Republicans, compared with 59% of those who planned to go to college, a gap that barely existed during the Obama years.

During the Obama years, male high school seniors who did and didn’t plan to go to college differed little in their political affiliation. In the years that followed, however, young men who did not plan to go to college became increasingly likely to identify as Republicans. By 2023 – the most recent data available – 77% were Republicans, compared to 59% of those who planned to go to college. Although the number of Republican young women also increased, the divide by college plans is not nearly as large as among young men. Even more intriguing, young men who have poorer grades in high school have also shifted hugely toward Republicans in the 2020s, after previously being less Republican than those with A averages. To put it in blunt terms, young men who feel like they’re losing are now more likely to be Republicans. The same is not true among young women, where those with poorer grades are still less likely to be Republicans than those with A averages.

Takeaways by Macro Roundup® AI

  1. By 2023, 77% of male high school seniors who did not plan to attend college identified as Republicans, compared with 59% of those who planned to go to college, a gap that barely existed during the Obama years.
  2. Young men with poorer high school grades shifted heavily toward the Republican Party in the 2020s, after previously being less Republican than those with A averages.
  3. Republican identification also rose among young women, but the divide by college plans is much smaller than among young men, and young women with poorer grades remain less likely to be Republicans than those with A averages.

Related Articles:

  • The Shattering of the Democratic Coalition — The Democratic presidential margin among women narrowed from 12 points to 7 while the Republican margin among men widened from 5 points to 10, leaving the overall gender gap unchanged at 17 points. Women under 30 shifted 14 points toward Republicans and men under 30 shifted 29 points.
  • Young Women Are Starting To Leave Men Behind — Across the developed world, the share of young men neither in education, employment, nor seeking work has climbed steadily for decades, and in the UK, France, Spain, and Canada young men now outnumber young women outside the economy for the first time. Over 80% of this group in the UK report long-term health problems.
  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.

AI Summary. The Chinese-built Port of Chancay on Peru's Pacific coast, developed by Cosco with local miner Volcan, uses Chinese-made automated cranes, vehicles and 5G towers, and its deep waters can accommodate larger vessels. Peruvian officials argue it will reshape maritime trade along South America's Pacific coast.

Joe Daniels and Steven Bernard Financial Times
Date Posted:

A Chinese-built megaport on Peru’s Pacific coast is set to transform regional trade in South America, reducing transit times from Peru to China by 10 days. China is Peru’s largest trading partner.

Is a Chinese-built megaport set to reshape South American trade?

Core argument: China is Peru's largest trade partner, taking $23.1bn of Peruvian exports in 2023 — largely copper, iron and fishmeal — versus $9.1bn bound for the United States.

Ahead of the ribbon-cutting at the Port of Chancay — a Chinese-built megaport on Peru’s Pacific coast that is set to transform regional trade — Chinese-made ZPMC unmanned cranes line the quay. BYD pick-up trucks sit ready to shuttle engineers around, while Huawei 5G internet towers have been freshly constructed to handle the automated operation. Peruvian officials argue the port, built by Cosco with local miner Volcan, will transform Peru — a big producer of copper and fruit — into the Singapore of South America, and will upend maritime trade along the continent’s Pacific coast as it can accommodate larger vessels in its deep waters. China is Peru’s largest trade partner, with copper, iron and fishmeal making up the bulk of exports worth a total of $23.1bn in 2023. US-bound exports amounted to $9.1bn.

Takeaways by Macro Roundup® AI

  1. China is Peru's largest trade partner, taking $23.1bn of Peruvian exports in 2023 — largely copper, iron and fishmeal — versus $9.1bn bound for the United States.
  2. The Port of Chancay, built by Cosco with Peruvian miner Volcan on Peru's Pacific coast, can accommodate larger vessels in its deep waters, and Peruvian officials say it will upend maritime trade along the continent's Pacific coast.
  3. Chancay's automated operation relies on Chinese equipment, including ZPMC unmanned cranes along the quay, BYD pick-up trucks to shuttle engineers and newly built Huawei 5G towers, with Peruvian officials arguing the port will make Peru the Singapore of South America.

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