The Macro Report | June 2019
The Fed's growth conundrum
The global economy has weakened a little and asset markets have tumbled because of the United States' trade disputes with China and other nations. The U.S. economy also faces headwinds from escalating trade tensions, a stronger dollar, and higher short-term rates. Federal Reserve chair Jerome Powell said that the central bank was prepared to act to sustain the economic expansion if the various trade spats weakened the economy. We predict the Fed will cut its policy rate by 50 basis points by the end of 2019.
In Europe, the elections for the European Parliament shook up domestic politics in a number of countries, including Germany and Italy. While the results showed an increase in support for right-wing populist parties, the feared populist wave fell short of expectations. German Chancellor Angela Merkel, who is widely regarded as the leader of Western Europe, will not seek a fifth term after her current term expires in 2021. Tracking the downward trend in risky assets, oil prices fell sharply in May amid concerns that rising trade tensions will weaken the global economy and hurt demand for crude.
Fed is inching toward a cut
A decelerating economy, volatile financial markets, and escalating trade tensions could force the Fed's hands on interest rates.
European elections deepen divide
Politics remain a worry in the region after the European Parliament elections strengthened Italy's right-wing maverick, Matteo Salvini.
About the macro report
The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.
Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis
Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis
Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics
Sterling Horne, Analyst
Politics and economics
Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting
Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics