Sonu Varghese
RIP Liberation Day?
Well, this came out of the blue, but a U.S. court essentially cancelled the tariffs that set off a global trade war (technically paused until July). The US Court of International Trade (USCIT) struck down all of the “IEEPA” tariffs imposed by President Trump. IEEPA is the International Emergency Economic Powers Act that was passed …
Sonu Varghese
May 29, 2025
How Meaningful Is the US Debt Downgrade by Moody’s?
Short answer: not very much. The longer answer is also pretty much the same thing, but it’s really the context around the debt downgrade, and especially the US fiscal situation, that raises important questions, not the downgrade by itself. Last Friday evening (May 16th), Moody’s finally joined their counterparts at S&P and Fitch in downgrading …
Sonu Varghese
May 21, 2025
Two Big Things to Keep an Eye On
In our 2025 Outlook, we highlighted the threat of tariffs and risk of elevated interest rates if the Federal Reserve doesn’t cut. Well, both have manifested now. Average tariff rates, even after the China pause, are at the highest level since 1934 — rising from 2.4% at the start of the year to 17.8%. If …
Sonu Varghese
May 16, 2025
Why Lower Oil Prices Haven’t Translated to Relief at the Pump
Oil prices have collapsed in recent months, with WTI crude oil prices now closer to $60/barrel after hitting $80/barrel in mid-January. Prices are down over 10% from the beginning of the year, and over 20% from peak levels in January. Normally, you’d think this would translate to lower prices at the pump. But that’s not …
Sonu Varghese
May 15, 2025
How To Identify a Recession, and Why It Matters for Investors
Recession calls have increased since the Liberation Day tariff extravaganza, with most economists increasing the odds of a recession in the next 12 months quite significantly relative to odds at the beginning of the year. The Wall Street Journal’s panel of economists raised the probability of a recession in the next 12 months to 45% …
Sonu Varghese
May 9, 2025
The Fed Is Buying Into the Tariff Bull Case, but That Pushes Out Cuts
The Federal Reserve (Fed) didn’t move policy rates at their May meeting, keeping them in the 4.25-4.50% range. This was widely expected, but all eyes (and ears) were on how they would telegraph future moves. Short answer: they didn’t. The only major change in the official post-meeting statement was that risks of higher unemployment and …
Sonu Varghese
May 8, 2025
The Labor Market Hasn’t Cracked, but That Means Higher Rates for Longer
The economy created 177,000 jobs in April, above expectations for 138,000 jobs. At the same time, this number can be revised quite a lot. (Job creation in February and March were revised down by a combined 58,000.) This is why the 3-month average is more useful, and right now that’s at 155,000. That’s not great, …
Sonu Varghese
May 2, 2025
What Next? The Bull Case and the Bear Case
Uncertainty may be the new normal. Markets have been extremely volatile, with the S&P 500 experience nine 1%+ intraday moves over the first three days of this week. It’s not that we’ve never seen volatility before — that’s part and parcel of investing. The difference now is that markets are hanging on, and reacting to, …
Sonu Varghese
April 24, 2025
The Fed Is Caught Between a Rock and a Cold Hard and Lonely Place
Federal Reserve (Fed) Chair, Jerome Powell, just gave us the most detailed description of how they’re thinking about policy in the face of massive tariffs. He was speaking at the Economic Club of Chicago, and participated in a Q&A after, with the former head of India’s Central Bank and University of Chicago professor, Raghuram Rajan. …
Sonu Varghese
April 17, 2025
Here’s How the US Tax Code Results in a Larger Trade Deficit
Happy Tax Day! Or not. Though if you’re a large multinational, tax day in the US doesn’t really matter. In fact, to “celebrate” Tax Day, I’m going to discuss how the US tax code impacts the trade deficit. This is very relevant now because of everything going on around tariffs, with one of the stated …
Sonu Varghese
April 15, 2025