The great American boom is finally running out of steam, leaving mountains of debt
Nvidia alone is holding up the universe.
The record does not look so good when you adjust for immigration. Real disposable income per capita is down 0.5pc over the last year. That may explain why so many voters are in such a bad mood.
The American economy is not as strong as we all thought. Growth has slowed to stall speed over the last four months. It looks like a hardish landing after all.
“The US economy is clearly slowing down, and in our base case it is headed for an outright contraction,” said Andrew Hollenhorst, Citigroup’s US chief economist.
If so, US Treasuries, German Bunds, and UK Gilts are massively mispriced. So are BBB junk bonds trading at an average wafer-thin spread of 1.09pc, matching the extreme complacency seen before the global financial crisis.
Citigroup says the Fed will be forced to cut interest rates in July and then at every meeting until mid-2025.
Investors must navigate these treacherous waters with great care. Well-timed calibrated Fed rate cuts and a soft landing can be a tonic for stock markets.
It is a different matter if the Fed is behind the curve, cutting rates only after recessionary forces have metastasised.
Torsten Slok from Apollo Global Management said the nominal deficit could blow through 10pc of when recession hits.
America’s debt accumulation over the last seven years is akin to the costs of a world war.
Ambrose Evans-Pritchard Telegraph 5 June 2024
https://www.telegraph.co.uk/business/2024/06/05/great-american-boom-running-out-steam-mountains-
Kommentarer