The good, the bad and the ugly
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Article Type
Insights
Topics
Politics, Macro
Published
April 23, 2025
Read time
5 mins
Author
Frank Rybinski, CFA
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We wanted to share a few key macro points from our recent monthly Global House View process. In March, we wrote about “The pall of uncertainty” stemming from the ongoing regime shift. The recent volatility in forecasts (our own included) is evidence of the pall's existence.  

 

The macro cost of this regime shift (so far) is a negative supply shock. To make a play on a classic 1960’s western, the sequencing of policy implementation matters so far has been front-loaded with the “Bad and the Ugly” (tariffs) as we still wait on “the Good” (tax cuts and de-regulation). In essence, one end of the see-saw has been loaded, while nothing has been placed on the other end to balance it out.

 

We continue to think that the tax bill needs to be passed before Congress’ August recess. That way it would align more closely with the expiration of the “pause” in the implementation of reciprocal tariffs. Alternatively, waiting until the end of the year to pass it (or later) would continue to push the see-saw in the direction of “the Bad and the Ugly.”  It’s also worth noting that the inclusion of bonus depreciation for structures would add to “the Good” side of the equation.

 

In terms of theater, hopefully the macro landscape doesn’t turn into a rendition of “Waiting for Godot," with the “Good” fiscal policy stuff being Godot. Hopefully, unlike the play, Godot actually arrives.

 

With all that said, we continue to believe that monetary policy is tight and that interest rates matter. Meanwhile, the consumer is in decent shape in terms of leverage. Recent consumer credit numbers continue to show contraction (the aggregate trends are directionally similar on the corporate side as well). This will, on net, pose a short-term headwind for the economy and be dis-inflationary on the margin.

 

Household debt/GDP (%)

Source: Haver Analytics. Data as of April 2025.

 

Consumer debt growth (real terms)

Source: Haver Analytics. Data as of April 2025.

 

But the Fed has its hands tied. The Fed loves optionality and given the panoply of potential outcomes under “the pall,” the Fed would (in our view) prefer to wait as long as feasibly possible before moving. As a result, we still think two rate cuts later this year would be  appropriate, with larger-than-normal tails around that.

Important disclosures

Author

Frank Rybinski, CFA
Head of Macro Strategy
Frank Rybinski, CFA, is head of macro strategy responsible for guiding the firm’s global macroeconomic view as it pertains to tactical and strategic asset allocation. This includes analysis of the economy, monetary & fiscal policy, interest rates and the relative value between asset classes.  
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