Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “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
  • “…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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, October 28, 2025

AI Summary. Capital spending by the largest US technology companies has risen from 4% to 15% of revenue since 2012, approaching the capital intensity of utilities, with Meta, Microsoft, and Alphabet each set to spend 21–35% of revenue. The authors argue this shift toward asset-heavy models is associated with inferior returns.

Kai Wu Sparkline Capital
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Meta, Microsoft, and Alphabet’s capex as a percent of revenue (21–35%) are now on par with utilities’ global mean and AT&T’s at the height of the telecom bubble. Kai Wu notes the “telecom index still remains -60% below its dot-com high 25 years later.”

Does rising capital intensity at big tech companies signal weaker returns?

Core argument: The Magnificent 7's capital expenditures have risen from 4% of revenue in 2012 to 15%, approaching the capital intensity of utilities, the most asset-heavy sector.

The Magnificent 7 are now turning away from the asset-light model that fueled their past success. Since 2012, capital expenditures have surged from 4 to 15% of revenue. The Magnificent 7’s capital intensity is quickly approaching that of utilities, the most asset-heavy sector. Meta, Microsoft, and Alphabet are each set to spend between 21 and 35% of their revenue on capex, more than both the average global utility today and AT&T at the height of the telecom bubble. In the dot-com upswing, telecom stocks skyrocketed, rising far above the broader tech index. However, in the bust, they plummeted back down to earth, leading to a devastating -92% loss. Incredibly, the telecom index still remains -60% below its dot-com high 25 years later. With the AI arms race transforming Big Tech from asset-light to asset-heavy, a model associated with inferior returns, our value-based playbook suggests rotating toward a broader set of AI beneficiaries with lower capital requirements and valuations.

Takeaways by Macro Roundup® AI

  1. The Magnificent 7's capital expenditures have risen from 4% of revenue in 2012 to 15%, approaching the capital intensity of utilities, the most asset-heavy sector.
  2. Meta, Microsoft, and Alphabet are each set to spend 21–35% of revenue on capex, more than the average global utility today and more than AT&T at the height of the telecom bubble.
  3. Telecom stocks rose far above the broader tech index in the dot-com upswing before falling -92% in the bust, and the telecom index remains -60% below its dot-com high 25 years later.

Related Articles:

  • Why We Are Not In A Bubble….Yet — The 5 largest US technology companies are worth about 16% of the global public equity market, and the top 10 US stocks nearly 25%, almost $25tn. The author argues valuations are high but not bubble-level, with the "Magnificent 7" median forward price-to-earnings ratio at 27x, roughly half that of the late-1990s leaders.
  • What GPU Pricing Can Tell Us About How The AI Bubble Will Pop — Price data from RBC Capital Markets show average hourly rental rates for Nvidia's H200 and H100 graphics chips down 29% and 22% year-to-date, with smaller providers driving the declines. Prices charged by the largest cloud providers — Amazon Web Services, Microsoft Azure, Google and Oracle — have hardly moved, widening the gap between them and newer entrants.
  • Minsky Moments and AI CapEx — Capital-spending forecasts for the four largest cloud providers rose nearly 50% over the year, and AI data centers are increasingly funded through leveraged and off-balance-sheet structures, including $3.2bn in senior secured notes and a roughly $30bn asset-backed financing. The author argues this marks a speculative-finance phase where borrowers must roll over principal.

AI Summary. An analysis of 87 identical-twin pairs raised apart with individual IQ and biographical data finds that pairs with similar schooling had an average IQ gap of 5.8 points and a correlation of 0.87, while educationally dissimilar pairs averaged a 12.8-point gap and a 0.75 correlation.

Jared Horvath and Katie Fabricant Acta Psychologica
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“Educationally similar” monozygotic (MZ) twins raised apart [TRA] have a mean IQ delta of 5.8 points, ~ the same as those raised together. “Educationally dissimilar” MZ TRA have a delta of 12.8 points, closer to non-twin siblings than twins reared together.

How much do schooling differences affect IQ gaps between separated twins?

Core argument: Among 87 twins-reared-apart pairs with individualized IQ and biographical data, the 52 with similar schooling show an intraclass correlation of 0.87 ± 0.02 and an absolute IQ gap of 5.8 points (SD = 6.7), nearly indistinguishable from identical twins reared together.

We gathered data from every available TRA [Twins Raised Apart] case published in the academic literature over the last century that included both individualized IQ and biographical data. This data set (which we believe represents the entirety of the non-amalgamated TRA field; the vast majority embodied in existing studies are amalgamated) consists of 87 pairs. We split these pairs into three groups: similar, somewhat dissimilar, and very dissimilar schooling. Of the 87 pairs, 52 experienced a similar type and duration of schooling within a similar location. In fact, 25 of these pairs attended the same school for some period of time. One would be correct in questioning whether these twins truly meet the criteria of ‘reared apart;’ eyebrows should certainly be raised over how varied researchers have defined the term. Analysis revealed that ‘Educationally Similar’ TRA pairs have an ICC of 0.87 ± 0.02 (n = 52) and an absolute IQ differential of 5.8 points (SD = 6.7). This makes this group nearly indistinguishable from MZ twins reared together. Further analysis of the 35 ‘educationally dissimilar’ TRA pairs shows an ICC of 0.75 ± 0.04 (n = 32) and an absolute IQ differential of 12.8 points (SD = 7.3). The correlation is 0.12 lower than the ‘educationally similar’ TRAs and the IQ differential places this group closer in stature to non-twin siblings than MZ or even dizygotic twins reared together.

Takeaways by Macro Roundup® AI

  1. Among 87 twins-reared-apart pairs with individualized IQ and biographical data, the 52 with similar schooling show an intraclass correlation of 0.87 ± 0.02 and an absolute IQ gap of 5.8 points (SD = 6.7), nearly indistinguishable from identical twins reared together.
  2. The 35 educationally dissimilar twins-reared-apart pairs show an intraclass correlation of 0.75 ± 0.04 (n = 32) and an absolute IQ differential of 12.8 points (SD = 7.3), placing them closer to non-twin siblings than to identical or fraternal twins reared together.
  3. Of the 52 educationally similar twins-reared-apart pairs, 25 attended the same school for some period, raising the question of whether those twins meet the criteria of "reared apart" and how varied researchers' definitions of the term have been.

Related Articles:

AI Summary. The International Energy Agency's projection for annual carbon dioxide emissions in 2040 has fallen from 50bn tons to 30bn tons, though the world is expected to fall far short of the 1.5°C Paris goal, with warming likely between 2°C and 3°C by 2100. Global energy demand is projected to more than double by 2050.

Bill Gates GatesNotes
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Noting that over the past decade global CO2 emissions projected by the IEA have fallen by more than 40%, Bill Gates argues innovation will likely “give us the tools we need to meet the growing demand for energy without increasing carbon emissions.”

Have emissions forecasts improved even as climate goals go unmet?

Core argument: The International Energy Agency has cut its 2040 global carbon dioxide emissions forecast from 50 billion tons, projected a decade ago, to 30 billion tons, and projects 2050 emissions will be lower still.

Ten years ago, the International Energy Agency predicted that by 2040, the world would be emitting 50 billion tons of carbon dioxide every year. Now, just a decade later, the IEA’s forecast has dropped to 30 billion, and it’s projecting that 2050 emissions will be even lower. Even if the world takes only moderate action to curb climate change, the current consensus is that by 2100 the Earth’s average temperature will probably be between 2°C and 3°C higher than it was in 1850. That’s well above the 1.5°C goal that countries committed to at the Paris COP in 2015. In fact, between now and 2040, we are going to fall far short of the world’s climate goals. One reason is that the world’s demand for energy is going up—more than doubling by 2050. Although wind and solar have gotten cheaper and better, we don’t yet have all the tools we need to meet the growing demand for energy without increasing carbon emissions. But we will have the tools we need if we focus on innovation. With the right investments and policies in place, over the next ten years we will have new affordable zero-carbon technologies ready to roll out at scale. Add in the impact of the tools we already have, and by the middle of this century emissions will be lower and the gap between poor countries and rich countries will be greatly reduced.

Takeaways by Macro Roundup® AI

  1. The International Energy Agency has cut its 2040 global carbon dioxide emissions forecast from 50 billion tons, projected a decade ago, to 30 billion tons, and projects 2050 emissions will be lower still.
  2. The current consensus holds that even with moderate climate action, Earth's average temperature in 2100 will probably be 2–3°C above 1850 levels, well above the 1.5°C goal countries committed to at the 2015 Paris COP.
  3. Global energy demand is set to more than double by 2050, and despite wind and solar becoming cheaper and better, the tools to meet that demand without increasing carbon emissions do not yet all exist.

Related Articles:

  • The Most Amazing Climate Policy Figure — U.S. carbon dioxide emissions from fossil fuels moved closely with GDP from 1992 to about 2005, after which the two decoupled, with GDP continuing to rise while emissions fell.
  • Take the Under — Downward revisions to global population and GDP projections make climate change appear more tractable, the author argues, since the scenarios used to model emissions rely on socio-economic assumptions that are more extreme than real-world observations. With slower population and economic growth, even partial policy successes could bring emissions consistent with a 2C target within reach.
  • European Glaciers Have Shrunk 40% Since 2000, Study Says — A study by 35 research teams found that glaciers in the Alps and Pyrenees lost about 40% of their volume in less than a quarter of a century. Excluding the Antarctic and Greenland ice sheets, glaciers elsewhere in the world lost 5% of their volume over roughly the same period.

AI Summary. Governments seeking supply-chain leverage face limited visibility into their own supply chains, and China's rare earth licensing requirements for multinationals may be partly intended to give Beijing that visibility and allow more precise targeting of future restrictions. Effective measures must impose asymmetric costs, and keeping foreign manufacturers dependent on drip-fed supply is central to Beijing's strategy.

Chris Miller Financial Times
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Chris Miller argues that “at the very least,” Beijing’s rare earth export controls will “drive up prices and make non-Chinese manufacturing less competitive” – a win for China, given its “sustained industrial overcapacity.”

How does supply-chain visibility give China leverage in trade disputes?

Core argument: China's rare earth licensing requirements, which oblige multinationals to apply for access, may be partly intended to give Beijing greater visibility into supply chains and thus more precise targeting of future restrictions.

Beijing, Brussels and Washington are all searching for the most efficient and asymmetric ways to gum up their adversaries’ supply chains. One challenge these governments face is knowledge. It’s no secret that manufacturers struggle to understand the depths of their own supply chains. There can be dozens of transactions between a raw material and a finished good. Governments have even less visibility. China’s rare earth measures — which require multinationals to apply for licences — may be partly intended to provide Beijing with more supply chain visibility. This implies more precise targeting of any future restrictions. A second challenge is finding measures with asymmetric costs. For the world’s three largest economies, the only measures that provide real leverage are those that induce far higher costs on their rival than themselves. The Covid-19 pandemic was supposed to have forced the world’s procurement managers to shift from a “just in time” model to a “just in case” one better prepared for disruption. But as China drip feeds rare earths to desperate manufacturers abroad, “just in time” is central to Beijing’s strategy to keep global multinationals hooked on its supply.

Takeaways by Macro Roundup® AI

  1. China's rare earth licensing requirements, which oblige multinationals to apply for access, may be partly intended to give Beijing greater visibility into supply chains and thus more precise targeting of future restrictions.
  2. Beijing, Brussels and Washington all seek asymmetric measures that impose far higher costs on rivals than on themselves, since only such measures give the world's three largest economies real leverage.
  3. Manufacturers struggle to understand the depths of their own supply chains, which can involve dozens of transactions between a raw material and a finished good, and governments have even less visibility.

Related Articles:

  • China Cracks Down On Foreign Companies Stockpiling Rare Earths — China is warning foreign buyers of rare earths and derived products such as magnets that building large inventories will bring supply restrictions, and is limiting approved export volumes to prevent stockpiling, according to people familiar with the matter.
  • Industrial Policy and Economic Security — Industrial policy justified on national security grounds requires weighing how much economic inefficiency is worth tolerating, since costs incurred today make a country poorer and therefore less able to project power later. The calculation is difficult because security gains are probabilistic and long-term economic costs are speculative.
  • Mad Libs: Just Fill In The Blanks — China expanded its rare earth export controls to require licenses for any product containing more than 0.1% by value of Chinese rare earths or made with equipment containing them, with a presumption of denial for military uses and scrutiny of advanced semiconductor uses. Aggressive enforcement would affect industries from chips and autos to aerospace, defense and medical equipment.

AI Summary. Retail and private investors are pouring billions of dollars into rare-earth companies, with MP Materials' share price roughly quadrupling to a market capitalization near $12bn and Australia's Lynas Rare Earths tripling after raising about $500m. Canadian processor Ucore Rare Metals, up more than 700%, won $18m from the Pentagon to build a Louisiana plant.

Jon Emont Wall Street Journal
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The West’s rare-earth industry is revving up as both private and government capital flow into the sector. MP Materials’ stock is up 354% year to date, and Lynas Rare Earths’ is up 186% relative to the S&P 500’s 15.5% return.

Are investors pouring billions into rare-earth companies?

Core argument: MP Materials, America's flagship rare-earth mining company, has seen its share price roughly quadruple this year, lifting its market capitalization to about $12 billion, as retail and private investors pour billions of dollars into rare-earth companies.

Retail and private investors are pouring in billions of dollars of their own. MP Materials, America’s flagship rare-earth mining company, has seen its share price roughly quadruple this year, raising its market capitalization to around $12 billion. Australian rare-earth company Lynas Rare Earths raised about $500 million from investors in August. Its share price has tripled this year. Ucore Rare Metals, a Canadian rare-earth processor, was awarded $18 million by the Pentagon to build its first commercial plant in Louisiana, which will turn raw rare earths into oxides used by many industries. Its stock price has jumped more than 700% this year.

Takeaways by Macro Roundup® AI

  1. MP Materials, America's flagship rare-earth mining company, has seen its share price roughly quadruple this year, lifting its market capitalization to about $12 billion, as retail and private investors pour billions of dollars into rare-earth companies.
  2. Ucore Rare Metals, a Canadian rare-earth processor, was awarded $18 million by the Pentagon to build its first commercial plant in Louisiana, converting raw rare earths into oxides, and its stock price has jumped more than 700% this year.
  3. Australian rare-earth company Lynas Rare Earths raised about $500 million from investors in August, and its share price has tripled this year.

Related Articles:

  • Mad Libs: Just Fill In The Blanks — China expanded its rare earth export controls to require licenses for any product containing more than 0.1% by value of Chinese rare earths or made with equipment containing them, with a presumption of denial for military uses and scrutiny of advanced semiconductor uses. Aggressive enforcement would affect industries from chips and autos to aerospace, defense and medical equipment.
  • China’s Weaponisation of Rare Earths is a New Kind of Trade War — China's export controls on rare earth materials and magnets threatened to halt production across the auto industry, the largest manufacturing sector in most advanced economies, and forced Washington to negotiate on tariffs. Despite China's well-known dominance of rare earth production, Western governments and companies have not developed alternative suppliers.
  • Pentagon Steps Up Stockpiling Of Critical Minerals With $1bn Buying Spree — The US Defense Logistics Agency has signaled plans to buy up to $500m of cobalt, $245m of antimony, $100m of tantalum and a combined $45m of scandium for its critical minerals stockpile, valued at $1.3bn. Stockpiled materials can be released only by the president in declared war or when deemed necessary for national defense.

AI Summary. A data firm estimates China's observable oil stocks reached a record 1.2bn barrels, triple the size of America's reserves, with storage capacity of 2bn barrels only 58% full and traders expecting stockpiling to continue. Analysts also note metal imports have soared even as China's metal-consuming industries have slumped.

Economist Staff The Economist
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China consumes 16mm barrels of oil a day, 75% of which is imported. Since February, China has stockpiled 110mm barrels, bringing its stock to 1.2B barrels. 1.5B barrels would cover 140–150 days of imports. China is also stockpiling industrial metals.

Is China building record stockpiles of oil and metals?

Core argument: China's observable oil stocks grew by 110m barrels since early February to a record 1.2bn, triple the size of America's reserves, according to the data firm Kayrros.

Since early February China’s observable stocks [of oil] grew by 110m barrels, to a record 1.2bn, reckons Kayrros, a data firm—triple the size of America’s reserves. There is scope to keep buying. China’s storage capacity of 2bn barrels is only 58% full, and more capacity will be built next year. Should the country stockpile at today’s rate, as traders expect, it could have 1.5bn barrels by next year, enough to cover 140-150 days of imports. Tom Price of Panmure Liberum, a bank, notes that [metal] imports have soared even though China’s metal-hungry industries have slumped. He estimates that stocks built in the last 20 months are sufficient to cover 20%, 50% and 108% of its annual demand for copper, zinc and nickel, respectively.

Takeaways by Macro Roundup® AI

  1. China's observable oil stocks grew by 110m barrels since early February to a record 1.2bn, triple the size of America's reserves, according to the data firm Kayrros.
  2. China's oil storage capacity of 2bn barrels is only 58% full, with more to be built next year, and stockpiling at the current rate would lift holdings to 1.5bn barrels, enough to cover 140-150 days of imports.
  3. Tom Price of Panmure Liberum estimates that metal stocks China built over the past 20 months cover 20% of its annual copper demand, 50% of zinc and 108% of nickel, even as its metal-hungry industries have slumped.

Related Articles:

  • How China Curbed Its Oil Addiction—and Blunted a U.S. Pressure Point — Nearly half of passenger vehicles sold in China last year were all-electric or plug-in hybrids, up from 6% in 2020, while domestic oil output rose 13% from 2018 to 2024 to about 4.3m barrels a day. China still imports roughly 11m barrels a day, about 70% of what it consumes.
  • Why is Xi Jinping Building Secret Commodity Stockpiles? — China's commodity imports rose 16% in volume terms with record imports of many basic resources, while state statisticians have stopped publishing stock data for many commodities. The US Department of Agriculture projects China will hold 51% of world wheat stocks and 67% of maize stocks, and the country's crude-oil storage capacity has grown from 1.7bn to 2bn barrels.
  • How Xi Sparked China’s Electricity Revolution — Electricity has risen to 30% of China's final energy use while plateauing near 22% in Europe and the US, supported by a decades-long grid expansion and upgrade program projected to cost as much as $800bn by 2030. Chinese grid investment is forecast to grow about 5% annually through 2030, faster than projected economic growth.

Wednesday, October 29, 2025

AI Summary. The authors estimate that about 4–20% of tariff-induced cost increases passed into US retail prices within six months, so a 20% tariff raised affected goods' prices roughly 3–4% relative to untariffed goods in the same category. They estimate the tariffs added about 0.7 percentage points to consumer price inflation, with pass-through accumulating gradually.

Alberto Cavallo, Paola Llamas, and Franco Vazquez Harvard University
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Product-level data on prices and effective tariff rates show pass-through of tariffs to retail prices increasing gradually, reaching 20% after 6 months. As of August, CPI had risen 2.9%, compared to an estimated 2.2% in the absence of tariffs.

How much of tariff costs reached retail prices within six months?

Core argument: Product-level regressions estimate that ~4–20% of tariff-induced cost increases showed up in retail prices within 6 months, implying a 20% tariff raised affected goods' retail prices by about 3–4% relative to unaffected products in the same category.

Using product-level regressions that relate monthly price changes to changes in applied tariff rates, we find that ~4 to 20% of tariff-induced cost increases were reflected in retail prices within 6 months. This magnitude is consistent with incomplete but nontrivial transmission, implying that a 20% tariff raised the retail prices of affected goods by about 3 to 4% relative to unaffected products in the same category. Pass-through is higher for goods facing larger tariff hikes and in sectors with thinner distribution margins. Aggregating these product-level effects using official CPI expenditure weights, we estimate that the 2025 tariffs added roughly 0.7pp to the all-items Consumer Price Index within six months of implementation. This contribution is economically meaningful: without the tariffs, the annual inflation rate in the all-items Consumer Price Index (CPI-U, NSA)—which stood at 2.9% in August 2025—would have been close to 2.2%, a level broadly consistent with the Federal Reserve’s inflation target. After 6 months, about 20% of the tariff changes were reflected at the consumer level, [suggesting that] pass-through will continue to accumulate gradually over time, putting persistent upward pressure on inflation statistics.

Takeaways by Macro Roundup® AI

  1. Product-level regressions estimate that ~4–20% of tariff-induced cost increases showed up in retail prices within 6 months, implying a 20% tariff raised affected goods' retail prices by about 3–4% relative to unaffected products in the same category.
  2. Aggregating product-level effects with official CPI expenditure weights, the authors estimate the 2025 tariffs added roughly 0.7pp to the all-items CPI within six months, so August 2025 annual inflation would have been near 2.2% instead of 2.9% without them.
  3. Pass-through is higher for goods facing larger tariff hikes and in sectors with thinner distribution margins, and with about 20% of tariff changes reflected at the consumer level after 6 months, the authors suggest pass-through will continue to accumulate gradually.

Related Articles:

  • A Note On Tariffs From The Real World — A large retailer reports that pre-tariff inventory is still being sold, so tariff costs will show up as margin hits later, and that prices must eventually rise roughly 10–15% to cover them. The retailer says its sector's tariff rate went from about 12% to about 33%, and that retailers are holding prices through the holiday season before raising them.
  • The U.S. Is Not “Winning the Trade War” — The U.S. is the world's largest single source of demand for manufactured goods but remains far smaller than the rest of the world combined, implying foreign producers will mostly avoid bearing the direct cost of tariffs. Consistent with this, the dollar has fallen about 7% against trading partners' currencies while pre-tariff import prices rose about 1%.
  • The U.S. Is Tiptoeing Away From Many of Trump’s Signature Tariffs — The US has exempted dozens of products from its reciprocal tariffs and offered to carve out hundreds more, from farm products to airplane parts, for countries that strike trade deals. The administration is simultaneously expanding tariffs grounded in Section 232 of the Trade Expansion Act, covering metals, autos, heavy trucks, pharmaceuticals and furniture.

AI Summary. Inflation-adjusted median income growth for 25–54-year-old workers declined and has hovered near decade lows, with a more marked slowdown among those aged 25–29. The authors suggest this may reflect a reduced pace of job-to-job transitions, seen in lower hiring and quit rates.

Chris Wheat and George Eckerd JP Morgan
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A JPM analysis finds real income growth for prime-age (25–54) American workers fell to 2% y/y in September. Nominal growth is ~ at its pre-pandemic pace, “but real purchasing power gains are at a relatively low level” given inflation.

Is slower job switching holding down real income growth for young workers?

Core argument: Median inflation-adjusted income growth among 25–54-year-olds declined in early 2025 and remained near decade-long lows through September.

Median income growth among 25–54-year-olds declined in early 2025 and remained low through September, hovering near decade-long lows after adjusting for inflation. Young people in our sample—workers aged 25–29—have experienced a more marked slowdown in income gains, potentially a function of the reduced pace of job-to-job transitions across the economy, reflected in lower hiring and quit rates. Persistently high increases in consumer prices have been a real headwind to purchasing power in recent years. Inflation hasn’t yet fallen to the Fed’s two percent objective, meaning that the solid recent rate of nominal income gains corresponds to nearly the weakest gains in real purchasing power seen over the past decade.

Takeaways by Macro Roundup® AI

  1. Median inflation-adjusted income growth among 25–54-year-olds declined in early 2025 and remained near decade-long lows through September.
  2. Workers aged 25–29 have experienced a more marked slowdown in income gains, potentially a function of a reduced pace of job-to-job transitions reflected in lower hiring and quit rates.
  3. With inflation still above the Federal Reserve's two percent objective, solid nominal income gains correspond to nearly the weakest real purchasing-power gains of the past decade.

Related Articles:

  • Jobless Growth — Labor demand growth may be too weak to keep pace with even modest labor supply growth: the labor market is somewhat weaker than before the pandemic, job growth has turned negative outside healthcare, and firms are focused on using AI to cut labor costs. Economists estimate most employment losses in routine manual occupations since the 1970s occurred during recessions.
  • Millions of Workers Are Left Out of the ‘Low-Hire, Low-Fire’ US Job Market — Economists expect anemic payroll growth with unemployment holding at 4.3%, a relatively low rate that masks workers stuck in unwanted jobs or underemployed. Goldman Sachs economists say labor market churn—the flow into and out of jobs—has fallen well below pre-Covid levels, and unemployment among 16-to-24-year-olds reached 10.5%.
  • A New Era of Higher Inflation Risks — The authors argue inflation's baseline is now higher than pre-pandemic, with 2% acting more as a floor than a ceiling, noting disinflation has largely stalled and core inflation has run above target on a six-month annualized basis for five years. They expect a structurally wider range of inflation outcomes, skewed to the upside and centered higher than in the 2010s.

AI Summary. US equities look expensive against sales, book value, earnings expectations and dividends, with the cyclically adjusted price-earnings ratio popularized by Yale University's Robert Shiller above 40 for the first time since the dot-com bubble burst. That measure never approached such a level over the preceding century, including before the 1929 crash.

John Authers Bloomberg
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John Authers notes that Shiller’s CAPE (cyclically adjusted price-earnings multiple) hit 40 for the first time since the dot-com bubble burst in 2000. “It never got close to that level over the preceding century, even on the eve of the 1929 Great Crash.”

Are US stocks expensive by every standard valuation measure?

Core argument: The S&P 500's cyclically adjusted price-earnings multiple (CAPE), popularized by Yale's Robert Shiller, exceeds 40 using Tuesday's close in Shiller's public spreadsheet, the first time above that level since the dot-com bubble burst in 2000.

US equities, whose results for the latest quarter have generally been coming in strong, look expensive. This is true whether we measure the S&P 500 with reference to sales, book value, earnings expectations or dividends The best-known long-term measure of stock market value is the cyclically adjusted price-earnings multiple (CAPE), popularized by Yale University’s Robert Shiller. Substituting Tuesday’s close into Shiller’s spreadsheet, which is public, delivers a CAPE above 40 for the first time since the dot-com bubble burst in 2000. It never got close to that level over the preceding century, even on the eve of the 1929 Great Crash. Even if we revise the CAPE ratio on the assumption that margins are permanently at their current level, they look way too expensive.

Takeaways by Macro Roundup® AI

  1. The S&P 500's cyclically adjusted price-earnings multiple (CAPE), popularized by Yale's Robert Shiller, exceeds 40 using Tuesday's close in Shiller's public spreadsheet, the first time above that level since the dot-com bubble burst in 2000.
  2. The CAPE never came close to 40 over the century preceding 2000, including on the eve of the 1929 Great Crash.
  3. US equities look expensive whether measured against sales, book value, earnings expectations or dividends, and remain expensive even when the CAPE is revised assuming margins stay permanently at current levels, despite generally strong latest-quarter results.

Related Articles:

  • Why We Are Not In A Bubble….Yet — The 5 largest US technology companies are worth about 16% of the global public equity market, and the top 10 US stocks nearly 25%, almost $25tn. The author argues valuations are high but not bubble-level, with the "Magnificent 7" median forward price-to-earnings ratio at 27x, roughly half that of the late-1990s leaders.
  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • 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.

AI Summary. Currencies of countries with low government debt burdens, including Sweden, Norway, and Switzerland, have outperformed the dollar, while the Japanese yen has fallen more than 2% against it and the euro has been flat. Japan's gross government debt stands at 240% of GDP, and the euro area is dominated by high-debt countries.

Robin Brooks Robin Brooks Substack
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Since Powell’s Jackson Hole speech, currencies issued by countries with low debt burdens are outperforming the currencies of high-debt countries. Brooks projects that Sweden’s “undervalued” Krona will emerge as a key safe-haven currency going forward.

Are currencies of low-debt countries outperforming the dollar?

Core argument: Since Jackson Hole, the Swedish krona has been the best-performing currency against the dollar, followed by the Norwegian krone and Swiss franc, a pattern attributed to countries with low debt burdens outperforming high-debt ones.

Countries with low debt burdens are outperforming ones with lots of debt. The right chart above shows this dynamic. Since Jackson Hole, the Swedish Krona (red line) is the best performing currency against the Dollar, followed by the Norwegian Krone (orange line) and Swiss Franc (black line). The Euro (pink line) is flat against the Dollar, no surprise since it consists mostly of high-debt countries, with Germany’s recent move to soften up its debt brake and pursue big fiscal stimulus a major destabilizer for the region. The Japanese Yen (blue line) is down over two percent against the Dollar, no surprise given that gross government debt is 240 percent of GDP. The fact that Sweden is at the top of the pack makes sense. The Krona is massively undervalued (it’s at the same level against the Euro as during the global financial crisis), while Sweden has also managed to steer clear of endlessly rising debt levels that so bedevil the Euro periphery.

Takeaways by Macro Roundup® AI

  1. Since Jackson Hole, the Swedish krona has been the best-performing currency against the dollar, followed by the Norwegian krone and Swiss franc, a pattern attributed to countries with low debt burdens outperforming high-debt ones.
  2. The Japanese yen is down over 2% against the dollar, a move tied to Japan's gross government debt of 240% of GDP.
  3. The euro is flat against the dollar, attributed to the bloc consisting mostly of high-debt countries, with Germany's move to soften its debt brake and pursue big fiscal stimulus a major destabilizer for the region.

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AI Summary. Bank of America expects the US Treasury to lean more heavily on short-term bill issuance, lifting bills to about 25% of outstanding debt from about 20%. Its strategists estimate the resulting reduction in longer-dated note and bond supply is equivalent to roughly $1tn of 10-year notes, worth at least 31 basis points of lower yields.

Elizabeth Stanton Bloomberg
Date Posted:
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A Bank of America analysis suggests Treasury’s anticipated decision to issue more short-term bills may drive the 10-year yield lower by more than 25bps. That decision would likely result in bills accounting for 25% of outstanding debt, up from 20% today.

Does heavier short-term bill issuance lower long-term Treasury yields?

Core argument: Bank of America strategists led by Meghan Swiber estimate the anticipated shift toward bill supply over the 2026 and 2027 fiscal years is equivalent to about $1 trillion of 10-year notes, a supply cut worth at least 31 and as much as 34 basis points.

Treasury officials are slated to unveil their financing strategy for November to January on Nov. 5, and Bank of America expects them “to lean more heavily on bill supply.” That would lead to bills accounting for about 25% of the outstanding debt, up from about 20%. The upshot is relatively less supply of notes and bonds maturing in two to 30 years, which should support their value and allow them to trade at lower yields, strategists led by Meghan Swiber said in a report. Over the 2026 and 2027 fiscal years, the anticipated increase in the relative bill supply is equivalent to about $1 trillion of 10-year notes, a supply cut they estimate is worth at least 31 basis points and as much as 34 basis points.

Takeaways by Macro Roundup® AI

  1. Bank of America strategists led by Meghan Swiber estimate the anticipated shift toward bill supply over the 2026 and 2027 fiscal years is equivalent to about $1 trillion of 10-year notes, a supply cut worth at least 31 and as much as 34 basis points.
  2. Bank of America expects Treasury officials to lean more heavily on bill supply, lifting bills to about 25% of outstanding debt from about 20%.
  3. Treasury officials are slated to unveil their November-to-January financing strategy on Nov. 5, and Bank of America says relatively less supply of notes and bonds maturing in two to 30 years should support their value and allow them to trade at lower yields.

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  • Passive Shortening — The US Treasury issues longer-term securities on a regular schedule and absorbs swings in financing needs through short-term bills, putting it on track to modestly shorten its debt maturity structure. As short-term debt grows, government interest expense becomes more closely tied to the Federal Reserve's policy rate.
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