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What's Driving Emerging Markets?
Emerging market (EM) equities have historically outperformed as the global economy gained momentum, as shown in Exhibit 1. After a great catch-up rally in the second half of 2012, the stocks finished the year as global outperformers only to lose that momentum in the first quarter of 2013. What is behind the recent underperformance, and what does it say about the outlook? Our research points to a number of contributors to the recent weakness.
Everyone Wants More Financial Stability, But at What Cost?
by Carl Tannenbaum of Northern Trust,
For all the good intentions, there is no guarantee that the rush to re-regulate will be successful. The next crisis may look nothing like the one just past, and the political will to take tough preventative steps during good times cannot be taken for granted.
Learnings From the Cyprus Saga
by Carl Tannenbaum of Northern Trust,
There are important differences between the situation in Cyprus and the challenges other southern European nations face that should limit the transfer of financial trauma. The hope remains that the ECBs promise to do whatever it takes to solve the sovereign debt crisis will ultimately settle markets. But access to certain types of ECB support requires reaching agreement on restructuring with the same European officials who have handled the situation in Cyprus so maladroitly.
Special Edition: The Outlook for 2013
by Team of Northern Trust,
At this time of the year we typically get warm and generous wishes for the New Year and, of course, numerous questions about what our crystal ball has in store for 2013. While many economists publish their perspectives prior to January 1, we opted to wait in the hope of having a clear fiscal picture for the United States. A lot of good that did us...
Some Non-Economic Thoughts for the Holidays
by Team of Northern Trust,
This past Wednesday, I took a short break from following the fiscal cliff saga. I was getting frustrated trying to sort out plan A, plan B, and plan C. I needed to put some distance between myself and the Federal budget, at least for a little while.
Fiscal Friction is Taking a Toll on Confidence in Washington and Rome
by Carl Tannenbaum of Northern Trust,
Fiscal friction is taking a toll on confidence in Washington and Rome. What inflation rate should be used to index entitlements? Our updated US forecast assumes a budget resolution before year end.
FOMC: More of the Same on QE, But New Language to Guide It
by Team of Northern Trust,
The Fed's decision to increase the scope and size of the quantitative easing program following the two-day FOMC meeting was largely expected. Its choice of new wording to express its posture came sooner than expected.
Questions and Answers Surrounding the Fiscal Cliff
by Team of Northern Trust,
There is no resolution yet to the US fiscal cliff. It is probably unfair to have expected one by now; the clock is too far from midnight. But as the negotiations continue, several questions have been raised that deserve some reflection. 1. The two sides seem to be making statements that reflect stark disagreement. Are talks failing? 2. Is our fiscal path a cliff, or a slope? 3. There is a proposal to limit the deductions claimed by high income taxpayers. How would these work, and what are the consequences? 4. The cliff has been in the news for a long time. Why isnt everyone prepared for it?
U.S. Economic and Interest Rate Outlook - October 2012
Budget negotiations in the US and Europe are attempting to balance austerity, prosperity, and posterity. US exports and imports are showing the strains of sluggish conditions overseas. Our updated economic forecast reflects some "cliff" effects, but not a renewed recession.
The Hard Road Ahead for Housing
by Carl Tannenbaum of Northern Trust,
The housing sector has come a long way, but has a long way to go. Mortgage underwriting standards have reverted to much more conservative norms, and housing policy is very much in a state of flux. The result: renting is on the increase, and may enjoy renewed popularity for some time.
Open-Ended Easing
The Federal Open Market Committee (FOMC) took a very forceful set of steps this week, designed to stimulate what officials have called a "frustrating" job market.
Our updated forecast suggests that the growth trajectory of the US economy is positive but sufficiently sub-par for the Fed to have initiated additional monetary policy support.
There are increasing signs that China's economy is slowing more than the official readings would suggest.
Fed Preview: Time to Forge Ahead
by Carl Tannenbaum of Northern Trust,
I got home at about 8 one evening last week, and it looked like a bomb had gone off inside my house. The shrapnel included empty pop cans, open bags of snacks, and scores of used napkins. The sink was filled with dirty dishes, and laundry (clean, or dirty?) was strewn about the floor. No one was home, leading me to suspect that the explosion had done them all in.
The ECB: No Rest for the Weary
by Carl Tannenbaum of Northern Trust,
The economic picture in Europe is worsening, exposing flaws in the foundation of the euro compact. The European Central Bank is trying its best, but remains hindered by its charter. European policy makers should focus on stabilizing the situation first, and seeking retribution later.
Whats A House Really Worth?
by Carl Tannenbaum of Northern Trust,
Despite the well-documented correction in real estate prices, our property taxes have been slow to react. My wife is on a singular mission to correct this asymmetry, collecting evidence from a variety of sources that suggest that our house is relatively worthless. Good thing we don't need a home equity loan.
Setting Up for Jackson Hole
by Carl Tannenbaum of Northern Trust,
I was once favored with an invitation to the Federal Reserve's annual retreat in Jackson Hole, Wyoming. It was an amazing experience; the participant list was a Who's Who of global economic policy makers. I called my mother to brag, but all she wanted to talk about was the mischief that she and my father had gotten into while honeymooning in the area some fifty years earlier. Too much information.
Citius, Altius, Fortius
by Carl Tannenbaum of Northern Trust,
Countries across the globe seek faster, higher, stronger growth. Central banks in the United States and Europe are both seeking new ways to stimulate economic activity. Recent news from the housing market has been encouraging, but the race to recovery is likely to be a marathon, not a sprint. Headwinds blowing from Europe and China will continue to present significant downside risks to U.S. economic growth.
An Excess of Reserve
by Carl Tannenbaum of Northern Trust,
Bank credit has expanded nicely over the past two years, yet financial institutions continue to hold substantial pools of excess reserves with the Fed. Some suggest that this extended conservatism is hindering the economic expansion, and are calling on the Fed to lower the rate it pays on excess reserves. The ECB has already taken this step. We think that a cut in the interest rate on excess reserves is unlikely.
Peaks and Valleys
by Carl Tannenbaum of Northern Trust,
Second quarter economic activity disappointed on many fronts. The drama in Europe has taken its toll on exports, markets, and confidence. The 2012 election is starting to take shape, amid the approach of a huge fiscal "cliff" at the national and local level. The negativity and uncertainty which often surround Presidential campaigns may hinder economic and market performance. This months special focus is on the Fed's recent Survey of Consumer Finances, and what it means for our economy.
Central Banks Take Steps to Stimulate Economic Growth
by Asha Bangalore of Northern Trust,
Following the Feds extension of Operation Twist on June 20, 2012, the European Central Bank (ECB), Peoples Bank of China (PBoC), and the Bank of England (BoE) put in place new monetary policy support today as gloomy economic data have trickled in during recent weeks.
What Next For The Euro-Zone?
by Victoria Marklew of Northern Trust,
The European Union has just completed its 20th make or break Summit in a little over two years, and actually managed to beat expectations. Two key agreements were reached on June 28-29: expanding the remit of the two bailout funds to include sovereign debt purchases and eventually direct banking sector support; and creating a unified banking regulator for the Euro-zone under the auspices of the European Central Bank (ECB).
Patient But Vigilant Fed
by Asha Bangalore of Northern Trust,
Chairman Bernanke failed to offer broad hints about an imminent round of financial accommodation or an extension of Operation Twist (Maturity Extension Program) in his testimony on June 7. There were three key takeaways pertaining to the near term economic outlook from Bernanke's testimony and response to questions.
Labor Market Issues Hold Down Consumer Confidence Index in May
by Asha Bangalore of Northern Trust,
The Conference Boards Consumer Confidence Index slipped in May to 64.8 from 68.7 in the prior month. The sub-components of the index measuring the present situation (45.9 vs. 51.2 in April) and expectations of consumers (77.6 vs. 80.4 in April) declined in May. The Case-Shiller home price index rose 0.1% in March, after a 0.2% gain in the prior month. The back-to-back monthly increase is noteworthy because one gains of this sort were seen several ago, excluding the period when the first-time home buyer program was in place.
Sorting Out the Fiscal Cliff Issue
by Asha Bangalore of Northern Trust,
Under current law, the federal budget deficit in fiscal year 2013 will show a drastic decline from fiscal year 2012 as a result of scheduled increases in taxes and reductions in government spending. The Congressional Budget Office (CBO) estimates that the federal budget deficit of $1.17 trillion in fiscal 2012 will shrink to $612 billion in fiscal 2013. This sharp reduction of the federal budget deficit is referred to as the fiscal cliff in the financial media and macroeconomic discussions.
Don't End the Fed, Mend the Fed
by Paul Kasriel of Northern Trust,
Congressman Ron Paul has written a book entitled End the Fed. I have to admit that I have not read his book. But I have read many of Congressman Pauls excellent (in my opinion) essays on monetary theory and policy. Congressman Paul likely argues in End the Fed that the Fed and other central banks have created monetary "mischief" in the past and are likely to continue to do so in the future. Because of this monetary mischief, I assume that Congressman Paul would like to replace the Fed and other central banks with some form of a gold standard. I share Congressman Pauls sentiments.
Kasriels Parting Thoughts Mortgage Refinancing: Stimulative or Redistributive?
by Paul Kasriel of Northern Trust,
It is a little acorn for you to bury today and dig up in the future when some partial-equilibrium yahoo on CNBC says that total spending in the economy will get a boost as households refinance their mortgages at lower interest rates. Yes, the folks doing the refinancing will now have more income left over after making their monthly mortgage payment to spend on other things. But what about the ultimate lender who has had his higher-interest security called away from her? She was earning 6% on her loan but now is able to earn only 4% on the same type of loan.
The Cyclical Macroeconomic Impact of Taxmageddon 2013 and Seniors Worried about the Debt
by Paul Kasriel of Northern Trust,
December 31, 2012, the current federal personal income tax rate structure will revert to the structure that prevailed at the close of the Clinton administration. And among other things, tax rates also will go up because of the additional taxes on investment income as part of the Affordable (Health) Care Act. All told, tax revenues will increase by about $500 billion in 2013, which is about 3.2% of the Blue Chip survey average forecast of 2012 nominal GDP.
Kasriels Parting Thoughts Recent Federal Budgetary Trends: Facts, Not Opinions
The federal budget deficit reached its widest gap on a 12-month moving total basis in February 2010 at $1.478 trillion. Although remaining at astronomical levels, the budget deficit has been trending lower and stood at $1.246 trillion in March 2012. The year-over-year growth in the 12-month moving total of federal outlays peaked at 19.7% in July 2009. In March 2012, the year-over-year change in the 12-month moving total of federal outlays was minus 1.1%. The median growth in the year-over-year moving total of federal outlays from December 1955 through March 2012 is 6.6%.
Recent Federal Budgetary Trends: Facts, Not Opinions
by Paul Kasriel of Northern Trust,
The federal budget deficit reached its widest gap on a 12-month moving total basis in February 2010 at $1.478 trillion. Although remaining at astronomical levels, the budget deficit has been trending lower and stood at $1.246 trillion in March 2012.
Results 1,051–1,100
of 1,231 found.