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The Macro View – October 2016

United States

  • Second quarter U.S. economic growth was revised higher to 1.4%, according to the third and final estimate, leaving first half growth just north of 1.0%.
  • The markets will be anxiously awaiting the U.S. presidential election, as this election cycle has proven to be unlike any other.
  • Business investment will suffer from increased uncertainty surrounding the election and potential policy implications.
  • We remain encouraged by the resiliency of the U.S. labor market and elevated measures of consumer sentiment, both positives for consumption going forward.

International

  • The U.K. economy remains mired in post-Brexit uncertainty; in contrast the economic data has held up relatively well.
  • Thus far, U.K. consumers appear somewhat unfazed by the increased political uncertainty while the same is not true for businesses.
  • Meanwhile, the U.K. unemployment rate has held at cycle lows and inflation measures are running below long-run targets.
  • After strong Eurozone economic growth in the first quarter, second quarter growth slowed and risks remain tilted toward the downside as we await third quarter estimates.
  • Monetary policy has tried to support a struggling Eurozone economy, but help is needed on the fiscal side.
  • China remains the source of considerable uncertainty as their currency continued to weaken versus the dollar throughout September.

Global Monetary Policy

  • All four major developed market Central Banks held meetings in September to set, evaluate, adjust, and or tweak monetary policy. Monetary policy remains exceedingly accommodative by any historical measure.
  • The Bank of England (BOE) and European Central Bank (ECB) both resisted the urge to ease policy further taking a wait and see approach while flashing their dovish feathers.
  • The Fed voted to leave policy unchanged, but the number of descents grew from one to three, suggesting a growing divide within the committee.
  • Interestingly, the BOJ shifted policy and will now target specific yield levels while signaling to markets that they intend to let inflation run hot.

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