Tag: economy

inflation, interest rates, retirement, risk management

2023 Inflation and Parallels to the Seventies

James Cox

My most vivid memory of the Seventies is sitting in the car with my siblings and parents in a mall parking lot the week before Christmas and my mother crying because they couldn’t afford presents and had to file bankruptcy. For a 12-year-old it made the challenges of real life… real.

The seventies were a traumatic time for many Americans… the end of the Vietnam war, the political chaos of Watergate and Nixon, the oil embargo, gas rationing throughout the decade, the suffocation of unions, the loss of jobs and industries as Japan and South Korea became exporters. Economic instability was an ever-present cloud.

Moving in waves through the decade, the economy suffered from bouts of inflation and deflation. It made policy decision-making challenging at best… boost the economy to keep it from slowing down, or is the economy running too hot?

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AI, new economy

AI and the New Labor Economy

James Cox

I have been writing for years about the impact the AI will have on the economy, and especially on workers. In 2023 many commentators remarked that…

“The death of big tech as a leader of growth and earnings has been grossly exaggerated. That was the message from Surveillance guests today ahead of results from Alphabet Inc. and Microsoft Corp., especially given the pace and scope of recent technological advancements. (1)

Neuberger Berman’s Charles Kantor said artificial intelligence hasn’t been fully priced into the valuations of tech companies.

“I am quite optimistic that the very large index contributors will deliver earnings of high quality, and they’re protecting their cash flows this year,” he said. He said AI-related developments can add 500 basis points of value to tech adopters.

Rishi Jaluria of RBC Capital Markets agreed, saying ChatGPT-like technologies will offer long-lasting benefits in profitability and efficiency for the biggest players, with Microsoft on the leading edge of that race for now.

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income, inflation, interest rates, retirement, risk management

Fed Expects Higher Inflation in 2025

James Cox

In September 2024, the Federal Reserve finally started to cut rates after seeing lower inflation, strong labor markets and economic stregnth. The expectations at that point was for the Fed to cut rates 2 more times in 2024 and at least 4 more times in 2025. (1)

In November 2024, Trump was declared the winner of the presidential election and economists and Fed officials began to consider what impact policies around taxes, tarriffs and immigration would have on the economy. Going into the December FOMC meeting the expectation was for fed to cut rates 25bps, but the market was on edge as to whether the Fed plans to make further cuts in 2025. Could these new policies in the new year stoke or reignite inflation? (2)

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Climate change, environment, ESG, risk management, Socially Responsible Investing, SRI

Climate Crisis Impact on the Economy

James Cox

In a recent Harvard and NBER study, economists evaluated what impact the climate crisis is expected to have on the global economy. “This paper estimates that the macroeconomic damages from climate change are six times larger than previously thought. A 1 degree Celsius increase in global temperature leads to a 12% decline in world GDP.” They summarize, “A business-as-usual warming scenario leads to a present value welfare loss of 31%. These are multiple orders of magnitude above previous estimates and imply that unilateral decarbonization policy is cost effective for large countries like the United States.” (1)

The study continues, “Climate change implies precipitous declines in output, capital and consumption that reach 47% by 2100. These magnitudes are comparable to the economic damage caused by the 1929 Great Depression, but experienced permanently.”

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inflation, interest rates, retirement, risk management

“The Menace of Inflation”: Inflation in Perspective

James Cox

In May 1974 Fed Chairman Arthur Burns gave a commencement speech to Illinois College. The speech was titled “The Menace of Inflation”.

At this point in the 1970s the nation had been struggling with high inflation for four long years… For perspective, we have been only dealing with high and rising inflation for one year so far. His voice offers a view of what to expect in the years to come.

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