Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, April 29, 2025

AI Summary. The authors find that rising male non-participation across generations reflects both "pull" factors — schooling beyond high school, which explains much of the gap at younger ages, and caretaking, whose effect is larger for later generations — and "push" factors such as falling demand for less-skilled workers tied to import competition and technology.

Leila Bengali, Mary Daly, Evgeniya Duzhak and Cindy Zhao Federal Reserve Bank of San Francisco
Date Posted:
Is Database:
Database

The share of prime-age men not in the labor force rose from 2.9% to 10.9% btw 1950 to 2023. The decline is due to an increase in time spent in education and childcare as well as “push factors” such as increased disability and fewer available manual jobs.

Are men leaving the labor force by choice or lack of opportunity?

Core argument: Increased educational attainment beyond high school explains a large portion of the gap between Millennial and Baby Boomer male nonparticipation rates at younger ages, a pattern common across most racial/ethnic groups, with the gap shrinking to near zero around age 40.

We explore two potential classes of factors that could help explain rising non-participation across generations: 1) not participating or delaying labor market entry due to the draw of other opportunities or obligations (pull factors), and 2) leaving (or not entering) the labor force due to the lack of opportunities (push factors). Educational attainment beyond high school (e.g., college and vocational and technical training) has increased over time. Figure 8 illustrates how this is reflected in higher temporary absence from the labor force due to schooling. Examining the difference between Millennials’ and Baby Boomers’ nonparticipation rates shows that education explains a large portion of the gap at younger ages, a pattern common across most racial/ethnic groups. This gap shrinks at older ages, reaching near zero at around age 40. Our results [also] support the idea that caretaking pulls prime-age men out of the labor force. Coefficients are notably larger for later generations, suggesting that the caretaking pull factor has strengthened. Millennial men are more likely than their counterparts in earlier generations to identify being out of the labor force due to disability. [Finally] falling demand for less-skilled workers as a reason for increases in the non-participation rate, attributing the decline in demand in part to import competition and technology advancements. The resulting decline in wages associated with this falling demand could provide further disincentive for labor force participation for prime-age men whose skills have become less sought after.

Takeaways by Macro Roundup® AI

  1. Increased educational attainment beyond high school explains a large portion of the gap between Millennial and Baby Boomer male nonparticipation rates at younger ages, a pattern common across most racial/ethnic groups, with the gap shrinking to near zero around age 40.
  2. Caretaking pulls prime-age men out of the labor force, with coefficients notably larger for later generations, suggesting this pull factor has strengthened; Millennial men are also more likely than earlier generations to cite disability for nonparticipation.
  3. Falling demand for less-skilled workers, attributed in part to import competition and technology advancements, is offered as a reason for rising nonparticipation, and the associated wage decline could further disincentivize participation among prime-age men whose skills are less sought after.

Related Articles:

  • 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.
  • America’s Young Men Are Falling Even Further Behind — Labor force participation among US men ages 25 to 34 has not grown in a decade, standing at 89%, which one analysis of Bureau of Labor Statistics data estimates is more than 700,000 fewer participants than at 2004 rates; women's participation in that age group is up 6 percentage points over 10 years, to 79%.
  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.

AI Summary. Final sales to private domestic purchasers" — personal consumption plus business and residential fixed investment, excluding net exports, inventories and government spending — gives a more stable read on underlying growth than headline GDP. S&P Global estimates the US economy contracted at a 0.2% annual rate while this core measure grew 2.4%.

Jason Furman Financial Times
Date Posted:

Given the noise from the trade war, @jasonfurman proposes looking at the sum of consumer spending and fixed investment – “core GDP” – as a more reliable guide for tracking economic performance.

Does core GDP give a more stable read on underlying growth?

Core argument: S&P Global forecasts that US GDP contracted at a 0.2% annual rate in the first quarter while core GDP — final sales to private domestic purchasers — grew 2.4%, a more reliable guide to the economy's strength.

“Final sales to private domestic purchasers” is simply the growth of personal consumption and fixed investment, including business and residential investment. These tend to be inertial, with stable readings over time, just like the core consumer price index. What it excludes: net exports, inventories and government spending. This is important now because the trade war is having a huge transitory impact, especially on net exports and inventories, both in reality and in the difficulty of measuring the unusual movements. Current estimates for US first quarter growth suggest weak and possibly even negative growth. For now, the S&P Global forecast predicts that the economy contracted at a 0.2 percent annual rate. But its estimate for core GDP growth is 2.4%, a more reliable guide to the economy’s strength in the first part of this year, although tariffs could result in significant weakening going forward.

Takeaways by Macro Roundup® AI

  1. S&P Global forecasts that US GDP contracted at a 0.2% annual rate in the first quarter while core GDP — final sales to private domestic purchasers — grew 2.4%, a more reliable guide to the economy's strength.
  2. Final sales to private domestic purchasers, the growth of personal consumption and fixed investment including business and residential investment, excludes net exports, inventories and government spending, and tends to be inertial with stable readings over time.
  3. The trade war is having a large transitory impact on net exports and inventories, both in reality and in the difficulty of measuring those unusual movements, while tariffs could result in significant weakening going forward.

Related Articles:

  • How Are US Consumers and Firms Responding to Tariffs? — The author projects that new US tariffs will trigger a cascade: container departures from China slow, ship arrivals at US ports stop, trucking demand halts as shelves empty, and layoffs follow in trucking and retail. The projected end point is a recession.
  • ‘This Mindless Flailing Creates Recessions’: Four Economists Dissect Trump’s Tariffs — Economists argue the tariffs will shrink the US trade deficit by making the country an unattractive destination for capital, since foreign capital inflows require a trade deficit. They warn the policies could mark a break for the dollar comparable to the Suez crisis for the British pound, portending higher borrowing costs, less investment and more stagnation.
  • Bear Market Anatomy – The Path and Shape of the Bear Market — Cyclical and event-driven bear markets have both averaged declines of roughly 30%, but cyclical ones last about two years and take five to recover, versus about eight months and one year for event-driven; structural bear markets average 60% declines over three-plus years and take a decade to recover.

AI Summary. Because Chinese AI chips are less powerful, matching a 100,000-chip Nvidia B200 cluster could require roughly 300,000 Chinese Ascend 910Cs, raising energy use and the engineering complexity of distributing AI workloads, alongside a gap in Nvidia's software and networking ecosystem. With about 10x China's compute, the US can deploy proportionally more AI "virtual employees.

Lennart Heim ChinaTalk
Date Posted:
Is Database:
Database

American export controls are forcing China to build less efficient AI clusters. @ohlennart argues this will lead to an enduring American edge in broad compute capacity which in turn will “compound into a broader economic advantage over time.”

How does a compute advantage translate into broader economic advantage?

Core argument: Matching a cluster of 100,000 Nvidia B200s might require roughly 300,000 Ascend 910Cs in China, raising energy consumption and the engineering complexity of distributing AI workloads across chips.

If current trends in AI training continue—shifting from two chips in 2012 to clusters of hundreds of thousands in 2025—export controls may eventually bite harder. China would need to build significantly larger clusters to compensate for less powerful chips: a cluster of 100,000 Nvidia B200s (a leading U.S. AI chip) might require a Chinese equivalent of 300,000 Ascend 910Cs (China's leading chip), resulting in higher energy consumption and greater engineering complexity for distributing AI workloads. Compounding this hardware gap is Nvidia's sophisticated software and networking ecosystem—crucial for orchestrating massive AI chip clusters and currently unmatched by Chinese alternatives. Think of AI systems as “virtual employees” that can perform cognitive labor, replacing remote colleagues you’ve never met in person. The number of AI employees an economy can deploy hinges directly on its compute resources. With roughly 10 times more compute capacity than China, the U.S. can field proportionally more AI employees across its economy, in sectors as diverse as drug discovery, logistics optimization, industrial robotics, and AI research itself. This compute advantage therefore compounds into a broader economic advantage over time.

Takeaways by Macro Roundup® AI

  1. Matching a cluster of 100,000 Nvidia B200s might require roughly 300,000 Ascend 910Cs in China, raising energy consumption and the engineering complexity of distributing AI workloads across chips.
  2. With roughly 10 times China's compute capacity, the U.S. can field proportionally more AI "virtual employees" across drug discovery, logistics optimization, industrial robotics, and AI research itself.
  3. AI training has scaled from two chips in 2012 to clusters of hundreds of thousands in 2025, and export controls may bite harder as that trend continues, compounded by Nvidia's software and networking ecosystem that Chinese alternatives have yet to match.

Related Articles:

  • Microsoft’s Datacenter Freeze – 1.5GW Self-Build Slowdown & Lease Cancellation Misconceptions — Reported cancellations of about 2GW of Microsoft datacenter capacity cover only non-binding letters of intent, while the company holds roughly 5GW of pre-leased capacity under binding contracts slated to begin operating between 2025 and 2028. The authors estimate Microsoft accounted for more than 60% of all newly leased turnkey datacenter capacity over a recent six-quarter stretch.
  • A Critical Juncture Amid Policy Shifts — US artificial-intelligence-producing sectors' value added quadrupled from $278bn to $1.13tn in constant 2017 dollars between 2010 and 2023, raising their share of GDP from 2.4% to 3.5% while manufacturing's share fell 1.5 percentage points. The authors attribute the data-processing sector's productivity gains largely to elevated physical capital investment and complementary intermediate inputs, including energy.
  • AI Frenzy Leads US Venture Capital to Biggest Splurge In Three Years — Large US venture rounds are concentrated in a few high-growth, well-known companies such as OpenAI and Anduril, while most start-ups cannot access similar capital. Industry researchers describe this as an untested departure from traditional venture investing, which backs very early companies on the expectation that one outsized winner covers portfolio losses.

AI Summary. Commodities trading house Mercuria estimates China's copper inventories could be drawn down to zero within months, calling it one of the greatest tightening shocks in the market's history. US buyers rushing to secure copper ahead of potential US tariffs are pulling imports away from the rest of the world, putting the US in direct competition with China for supplies.

Tom Wilson and Camilla Hodgson Financial Times
Date Posted:

Chinese stocks of copper are on pace to hit zero over the summer as American demand surges in an effort to get ahead of tariffs.

Are US tariff fears draining China's copper inventories to zero?

Core argument: Mercuria's head of metals and mining research Nicholas Snowdon told the Financial Times that China's copper inventories could deplete to zero by the middle of June at the current pace of draws.

China’s copper stockpiles are on track to dwindle to nothing in just a few months, as the market suffers “one of the greatest tightening shocks” in its history on fears of US tariffs, according to senior executives at commodities trading house Mercuria. Huge US demand, as buyers rush to get their hands on copper ahead of the potential imposition of levies by the Trump administration, was sucking imports of the metal into the country from the rest of the world and setting it up in direct competition with China for supplies, said the Geneva-based group. Chinese stocks of copper have rapidly declined over the past few weeks, and “at the current pace of draws, those Chinese inventories could deplete [to zero] by the middle of June”, Nicholas Snowdon, Mercuria’s head of metals and mining research, told the Financial Times.

Takeaways by Macro Roundup® AI

  1. Mercuria's head of metals and mining research Nicholas Snowdon told the Financial Times that China's copper inventories could deplete to zero by the middle of June at the current pace of draws.
  2. Mercuria executives describe the copper market as suffering "one of the greatest tightening shocks" in its history, driven by fears of US tariffs.
  3. US buyers rushing to secure copper ahead of potential Trump administration levies are pulling imports from the rest of the world, putting the US in direct competition with China for supplies, according to Mercuria.

Related Articles:

  • How Tariffs Could Shock America’s Power System — US electricity prices have risen at a compound annual rate of 5.7% over five years, after being roughly flat in the prior five years. Transformers could become a chokepoint: analysts estimate only about 20% of US transformer demand can be met domestically, with prices up 70%–100% on higher electrical steel and copper costs.
  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.
  • World’s Largest Transformer Maker Warns of Supply Crunch — 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.

AI Summary. The Swiss Re Institute projects insured losses from natural catastrophes could reach $145bn this year, above the 10-year average, with severe thunderstorms, floods and wildfires as the main drivers and about $40bn from Los Angeles wildfires. The report attributes intensifying risks to population growth, urban sprawl and climate change.

Gautam Naik Bloomberg
Date Posted:

Reinsurer Swiss Re estimates natural disasters could cause $145B of insured losses in 2025, including $40B from losses related to the Los Angeles wildfires.

Are insured catastrophe losses rising above their ten-year average?

Core argument: Swiss Re Institute projects insured losses from natural catastrophes could reach $145 billion in 2025, well above the 10-year average, citing population growth, urban sprawl and climate change.

Insured losses from natural catastrophes could soar to $145 billion this year — well above the 10-year average — as population growth, urban sprawl and climate change combine to supercharge risks, according to a report by Swiss Re Institute. Severe thunderstorms, floods and wildfires are the main drivers behind this year’s loss estimate, the reinsurer said in a report on Tuesday. The figure is based on a long-term growth trend of 5% to 7% each year and includes about $40 billion in losses from the Los Angeles wildfires. As natural disasters become more frequent, the US is bearing the brunt of insured losses. In 2024, America accounted for almost 80% of the global total, with losses concentrated in Florida, Texas, California, Louisiana and Colorado.

Takeaways by Macro Roundup® AI

  1. Swiss Re Institute projects insured losses from natural catastrophes could reach $145 billion in 2025, well above the 10-year average, citing population growth, urban sprawl and climate change.
  2. Swiss Re's $145 billion estimate rests on a long-term loss growth trend of 5% to 7% a year and includes about $40 billion from the Los Angeles wildfires, with severe thunderstorms, floods and wildfires the main drivers.
  3. The US accounted for almost 80% of global insured catastrophe losses in 2024, concentrated in Florida, Texas, California, Louisiana and Colorado, according to Swiss Re Institute.

Related Articles:

  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • Reinsurers Little Exposed to LA Fires After Retreat From Disaster Risks — Citi analysts estimate reinsurers could absorb less than 3% of insured losses from the Los Angeles wildfires. Reinsurers' share of modelled catastrophe risk has fallen from about 46% over the past 25 years to 33%, following years of wildfire losses that led major reinsurers to reduce their appetite for such risks.
  • Catastrophe Bonds Look Set to Dodge Losses as LA Fires Rage — Catastrophe bonds, which insurers use to transfer risk to capital markets and which pay out only when cumulative losses over a year exceed a preset threshold, are unlikely to incur significant losses from wildfires in Los Angeles. The Swiss Re Global Cat Bond Index gained more than 17% in 2024, following a record near-20% return in 2023.

Wednesday, April 30, 2025

AI Summary. This review argues that alarm over the effect of expanded trade with China on US workers is unwarranted given the ambiguity of the evidence, and that economic theory holds freer trade tends to benefit a country even when other countries erect trade barriers. Evidence linking Chinese imports to manufacturing employment lacks clarity.

Scott Winship First World Problems
Date Posted:
Is Database:
Database

Scott Winship revisits the “China Shock” analysis and finds that its extension to conclusions about national declines in manufacturing employment may be overstated. His paper provides a useful survey and summary of the related literature.

Is alarm over trade with China's effect on US workers warranted?

Core argument: The review argues that the debate over how increased trade with China since its WTO accession and grant of permanent normal trade relations status affected workers has been unduly alarmist given the ambiguity of the available evidence.

The message from this review is that the debate around the effect on workers of increased trade with China since it joined the WTO and was granted permanent normal trade relations status has been unduly alarmist given the ambiguity of the evidence we have at hand. Economic theory offers a variety of reasons to think that voluntary exchange benefits both parties in a trade and that freer trade tends to benefit a country even in the face of trade barriers erected by other countries. If the evidence clearly contradicted the theory, we would want to strongly question the theory. But even confining ourselves narrowly to the evidence on manufacturing employment and Chinese imports—ignoring all the other channels whereby trade affects Americans—we see no such clarity.

Takeaways by Macro Roundup® AI

  1. The review argues that the debate over how increased trade with China since its WTO accession and grant of permanent normal trade relations status affected workers has been unduly alarmist given the ambiguity of the available evidence.
  2. Economic theory offers reasons that voluntary exchange benefits both parties to a trade and that freer trade tends to benefit a country even when other countries erect trade barriers.
  3. Even confined narrowly to evidence on manufacturing employment and Chinese imports, setting aside other channels through which trade affects Americans, the review finds no clear contradiction of that theory.

Related Articles:

  • Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization — Analysis of U.S. register data finds that employment levels in places exposed to Chinese import competition more than fully rebound, while employment-to-population ratios stay depressed and manufacturing employment continues to shrink. The authors find the recovery comes almost entirely from young adults and foreign-born immigrants taking first jobs in lower-wage service sectors, with both in- and out-migration remaining depressed.
  • The China Shock Revisited: Job Reallocation and Industry Switching in U.S. Labor Markets — 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.
  • 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. Recent moves in stocks, bond yields, the yield curve, and the dollar are small relative to the 15-year run in asset prices and to the scale of underlying shifts underway. The US share of world stock market value went from 50% to almost 75%, and recent underperformance barely undoes a couple of months of that gain.

Karen Karniol-Tambour and Jim Haskel Bridgewater Associates
Date Posted:
Is Database:
Database

Bridgewater’s Karen Karniol-Tambour argues that changes in equity prices and bond yields do not reflect the “magnitude of underlying tectonic shifts that are underway” that imply “all US assets are under exceptional risks” from lower foreign inflows.

Are recent market moves small relative to the past 15 years?

Core argument: Karen Karniol-Tambour notes the US share of world stock markets rose from 50% to almost 75%, against which recent market moves are barely noticeable.

When you then just go and step back and look at these market moves in the context since 2010 or so—since this run we had in the last 15 years in assets—they are very small. The magnitude of what has actually occurred in pricing is very small relative to what I really believe is the magnitude of underlying tectonic shifts that are underway here. If you look at the stock market, the US moved from 50% to almost 75% of world stock markets. What’s happened recently is barely noticeable. The US has been outperforming every single country in the world massively. The last few weeks have felt like dramatic underperformance, but it barely undoes a couple of months of this. The bond yield, the moves feel large because we’re not used to them happening on days like these, but the bond yield’s kind of right in the range it has been for a while. The yield curve slope, it’s certainly sharper than it was—and that was a fast move—but this is not a major risk premium yet. This is not anything like a steep yield curve. And in the currency markets, the run that the dollar has had has just barely started to reverse in the recent moves.

Takeaways by Macro Roundup® AI

  1. Karen Karniol-Tambour notes the US share of world stock markets rose from 50% to almost 75%, against which recent market moves are barely noticeable.
  2. Karniol-Tambour argues the magnitude of recent price moves is very small relative to the underlying tectonic shifts she believes are underway, with the bond yield still within the range it has occupied for a while.
  3. Karniol-Tambour says the yield curve slope is sharper than it was after a fast move but does not yet reflect a major risk premium, and the dollar's run has only barely started to reverse.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • The Great European Disentanglement From US Stocks Has Only Just Started — Federal Reserve data show European investors held about $9tn in US stocks, roughly 17% of the total value of the US market. After inflation, a dollar invested in the US at the start of 2000 was worth $3.28 by the end of 2024, versus $1.63 for the rest of the world.
  • Dollar Upheaval: This Time is Different — Standard interest-rate parity implies a 50 basis-point rise in U.S. long-term yields relative to European yields should appreciate the dollar about 5%, yet the dollar depreciated 3.6%, leaving an 8.6% gap. The authors argue investors have reduced their willingness to pay for the safety and liquidity of all dollar-denominated assets, not only U.S. Treasury securities.

AI Summary. Even if US tariffs on China are lowered from 145%, the author argues the likely landing point is a still-high rate near 50%, closer to the campaign proposals of 60% on China and 10% on other countries. Such tariffs would be partly absorbed by historically high corporate margins but still cause economic disruption through lower growth and employment.

Joseph Wang Fed Guy Blog
Date Posted:

Potential reductions in the level of the China tariffs suggest the White House is “settling down for an extended trade war,” @FedGuy12 argues. This suggests that the equity market has further to fall as near-record margins are compressed.

Will lower tariffs on China still disrupt growth and employment?

Core argument: De-escalation from 145% tariffs on China likely settles near 50%, a level the author argues remains economically disruptive despite the positive market reaction.

A de-escalation away from 145% tariffs on China may be cheered by the markets, but the end result is likely a still high ~50% tariff that will be economically disruptive. The positive market sentiment suggests a capitulation on the trade war, but Trump’s multi-decade vision on trade is unlikely to melt away due to a month of a commotion. It is more likely that he walks back the bluster of Liberation Day and settle towards tariffs that are high but not ridiculous, such as the 60% on China and 10% on everyone else he had campaigned on. That is not disaster and can in part be absorbed by the historically high corporate margins. But it will also still result in widespread economic disruption that will show up in lower growth and employment in the coming months. That suggests the lows of the stock market are not yet in.

Takeaways by Macro Roundup® AI

  1. De-escalation from 145% tariffs on China likely settles near 50%, a level the author argues remains economically disruptive despite the positive market reaction.
  2. Trump's campaign platform of 60% tariffs on China and 10% on all other countries is the more likely landing point, walking back the bluster of Liberation Day without abandoning a multi-decade trade vision.
  3. Historically high corporate margins can absorb part of the tariff burden, but the author expects widespread disruption in the form of lower growth and employment, and argues the stock market's lows are not yet in.

Related Articles:

  • On Bubble Watch — Data from J.P. Morgan Asset Management covering monthly observations over a 27-year period show a strong relationship between the S&P 500's starting price-to-earnings ratio and its annualized return over the following ten years, with higher starting valuations consistently followed by lower returns. Purchases at a multiple near today's 22x were followed by ten-year returns between +2% and -2%.
  • 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.
  • Data Update 2 for 2025: The Party Continues (for US Equities)! — Applying an internal-rate-of-return approach to the S&P 500 using consensus earnings and payout estimates implies an expected stock return of 8.91% and an equity risk premium of 4.33%. Assuming the premium reverts to 4.5% yields an index value about 12% below current levels, with an estimated 80% chance stocks are overvalued.

AI Summary. An analysis attributes the pre-pandemic decline in the U.S. neutral real interest rate to international factors and population aging, with fiscal spending pushing rates up; since 2019 international factors have instead put upward pressure on U.S. real rates. The estimates suggest productivity growth has played a very minor role.

Carlos Carvalho, Andrea Ferrero, Felipe Mazin and Fernanda Nechio Federal Reserve Bank of San Francisco
Date Posted:
Is Database:
Database

Since 2019, aging has continued to put modest downward pressure on US real rates, but has been offset by fiscal policy, leaving real rates elevated relative to their pre-pandemic level.

What drives changes in the U.S. neutral interest rate?

Core argument: The estimates associate most of the pre-pandemic decline in U.S. real rates with both domestic and foreign developments: international factors captured by the global rate and U.S. population aging pushed r-star down, while fiscal spending pushed it up.

Figure 3 reports the contributions of potential trends behind U.S. r-star before the pandemic (blue bars) and since the pandemic (red bars). The bulk of the pre-pandemic decline in U.S. real rates can be associated with both domestic and foreign developments. International factors, as captured by the global rate, and U.S. population aging contributed significantly to pushing U.S. real rates down. In contrast, fiscal spending put upward pressure on U.S. real rates. Since 2019, however, international factors have put upward pressure on U.S. real rates. Population aging has continued to put a modest downward pressure on U.S. real rates, while fiscal spending has continued to put upward pressure on U.S. rates. In both periods, the estimates suggest that TFP has played a very minor role in driving r-star.

Takeaways by Macro Roundup® AI

  1. The estimates associate most of the pre-pandemic decline in U.S. real rates with both domestic and foreign developments: international factors captured by the global rate and U.S. population aging pushed r-star down, while fiscal spending pushed it up.
  2. Since 2019, international factors have put upward pressure on U.S. real rates, while population aging has continued to exert modest downward pressure and fiscal spending continued upward pressure.
  3. Total factor productivity played a very minor role in driving U.S. r-star in both the pre-pandemic and post-pandemic periods, according to the estimates reported in Figure 3.

Related Articles:

AI Summary. West Texas Intermediate crude fell as much as 4%, briefly dipping below $59 a barrel, after a report that Saudi officials have told allies and industry experts the kingdom can withstand a sustained period of depressed prices. The report added to concerns that Saudi Arabia would steer OPEC+ toward another supply increase.

Mia Gindis and Alex Longley Bloomberg
Date Posted:

West Texas fell under $59 a barrel amid reports that OPEC+ will increase production.

Are oil prices falling on signs producers will maintain higher output?

Core argument: West Texas Intermediate crude fell as much as 4% to briefly dip below $59 a barrel after Reuters reported that Saudi officials have told allies and industry experts the kingdom can endure a sustained period of depressed prices.

West Texas Intermediate fell as much as 4% to briefly dip below $59 a barrel on Wednesday after Reuters reported that Saudi Arabian officials have been telling allies and industry experts that the kingdom can endure a sustained period of depressed prices. The drop is putting futures on pace for the largest monthly decline since November 2021. The report added to existing concerns that Saudi Arabia planned to steer OPEC+ to agree on another supply surge next week.

Takeaways by Macro Roundup® AI

  1. West Texas Intermediate crude fell as much as 4% to briefly dip below $59 a barrel after Reuters reported that Saudi officials have told allies and industry experts the kingdom can endure a sustained period of depressed prices.
  2. West Texas Intermediate futures are on pace for their largest monthly decline since November 2021.
  3. The Reuters report added to existing concerns that Saudi Arabia planned to steer OPEC+ toward agreeing on another supply surge next week.

Related Articles:

  • The Petrodollar Is Dead, Long Live the Petrodollar — Saudi Arabia has no surplus left to recycle and is instead borrowing heavily in sovereign debt markets and selling assets, including stakes in its national oil company, to fund its economic plans. The International Monetary Fund projects the Saudi current account surplus narrowing to 0.5% of GDP before shifting into deficit through the end of the decade.
  • Texas Oil Executives Are Frustrated at Trump for Crushing Crude Prices — West Texas Intermediate crude near $57 sits below the price US oil executives say new wells need to break even, according to a Federal Reserve Bank of Dallas survey, discouraging them from expanding supply. S&P Global Commodity Insights projects $50 oil could cut output by over 1m barrels a day.
  • Oil Was Written Off. Now It’s the Most Productive US Industry — 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.