Asks for expectations and hopes from the Fed ahead of their meeting.
Brian
Joe LaVorgna
The key question is where the neutral rate is, and it's likely much lower than the market believes. Rates should be lower and may need to be stimulative to help old economy sectors.
Questions whether the economy is actually doing very well.
Brian
Joe LaVorgna
Affirms strong economy: Q2 growth was high, Q3 growth expected 3.5-4%, NFIB hiring data excellent, job claims at multi-year low. Trump policies' effects are yet to fully kick in, leading to a capex and building boom. Forecasts 3%+ growth next year.
Raises a warning from another analyst that cutting rates too much could fuel a debt bubble, especially around AI investments.
Brian
Joe LaVorgna
Pushback: Earnings are strong and broadening beyond AI into business equipment. Rates are high based on Fed's own calc. Inflation is in services, but rents are dropping precipitously, partly due to sealed border increasing housing supply. The flat yield curve and well-anchored inflation expectations signal low inflation risk. A Trumpian capex boom is historically disinflationary.
Notes public focus on immigration and inflation ('the two I's'), and suggests immigration restriction could raise inflation via labor shortages, creating sticky wage pressures.
Brian
Joe LaVorgna
Adds a third 'I' for Investment, which is at multi-decade highs and increases supply-side potential. Affordability issues are addressed by raising wages via capital investment (100% expensing for factories), no tax on tips/overtime. Real blue-collar wages are up 1%, a strong reading. Progress is being made on inflation; gas prices are near 5-year lows.