We have heard an awful lot about the inflationary consequences of tariffs, but I wonder if those concerns are not being enflamed by the main stream media who are constantly looking for anything to say about President Trump that is negative. arguably, the impact of tariffs will exist, but to assume that 25% tariffs is going to raise the price of all our imports from Canada and Mexico by that much is poor math. price increases will only occur on those items that are price inelastic. for instance, Chipotle has already said they are going to absorb the higher cost of avocados, and there will be numerous instances where the price impact will be significantly lower than the headline tariff rate. second, the substitution effect will have a significant impact as well, so the all in price rises there are likely to be far less than currently feared.
however, I agree that inflation is unlikely to fall regardless, for other reasons.
on the growth side, while Q1 seems likely to have a negative GDP print given the Net Export impact, this recession, when it comes, will have been the longest awaited recession in history. certainly segments of the economy are likely to slow down, but the entire thing? I'll take the over
Although I disagree on avoiding HY credit--it depends. Generally, I'd stick with short maturities and strong YTMs---security selection is key. CLOs, as a class, is attractive.
Its a very difficult timeline. Everyday one tweet makes a joke out of yesterdays tweet.
We have heard an awful lot about the inflationary consequences of tariffs, but I wonder if those concerns are not being enflamed by the main stream media who are constantly looking for anything to say about President Trump that is negative. arguably, the impact of tariffs will exist, but to assume that 25% tariffs is going to raise the price of all our imports from Canada and Mexico by that much is poor math. price increases will only occur on those items that are price inelastic. for instance, Chipotle has already said they are going to absorb the higher cost of avocados, and there will be numerous instances where the price impact will be significantly lower than the headline tariff rate. second, the substitution effect will have a significant impact as well, so the all in price rises there are likely to be far less than currently feared.
however, I agree that inflation is unlikely to fall regardless, for other reasons.
on the growth side, while Q1 seems likely to have a negative GDP print given the Net Export impact, this recession, when it comes, will have been the longest awaited recession in history. certainly segments of the economy are likely to slow down, but the entire thing? I'll take the over
Nice summation, Nelson.
Although I disagree on avoiding HY credit--it depends. Generally, I'd stick with short maturities and strong YTMs---security selection is key. CLOs, as a class, is attractive.