Many times people’s eyes glaze over when it comes to macro analysis and I get it. Macro analysis is by definition: Macro. It’s like watching a glacier melt and it only becomes of concern when the glacier structure collapses and you just happen to be in front of it. And then everybody says: Nobody could’ve seen it coming.
Yet following the macro pieces is so incredibly important and I continuously try to dedicate some time to dissect the big data pieces and the data keeps screaming the same message: The Writing is on the Wall.
Here’s a few that stuck out in the past few days.
“Goldman Sachs sees a tidal wave of red ink — and it may drag the U.S. economy into its undertow.
Federal deficit spending is headed toward “uncharted territory,” the firm said on Sunday, suggesting that the Trump administration and Congressional Republicans may not be able to count on the economic boost of tax reform for very longer. Goldman Sachs warned that the economic impetus from tax reform may have diminishing returns after this year. “The fiscal expansion should boost growth by around 0.7pp in 2018 and 0.6pp in 2019, but will likely come to an end after that”—listing a litany of reasons why spending and debt would conspire to undermine the world’s largest economy.
Goldman’s analysts wrote that the “growth effect comes from the change in the deficit, not the level, and further expansion would put the U.S. onto an even less sustainable long-term trend. Second, some of the recent deficit expansion relates to changes unlikely to be repeated, such as the temporarily large effect of certain tax provisions.”
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