Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Trade/ Debt/ Shadow Banking/ US-China/ Wildlife

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Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

<p>Bond investors and the Federal Open Market Committee (FOMC) expect economic growth to be strong in 2021, thereby raising inflationary risks, but the latter anticipates slower expansion next year to justify not having to invoke a monetary policy offset. Meanwhile, despite the idiosyncratic features of the Great Lockdown, there has been a general lack of commentary about the potential risks for economic outcomes to fall short of expectations.</p>
<p>The Great Lockdown highlighted a large divergence between notional and effective demand, a gap which was quickly reduced once restrictions on social gatherings were eased. Political decisions to combat COVID-19 over the past 14 months make forecasting the unfolding dynamics that will underpin future economic growth much more difficult than usual.</p>
<div>The recovery in US aggregate demand was rapid and extremely robust after an extraordinary contraction in 2020 Q2, thereby already reducing the impact of pent-up demand for big-ticket items on subsequent economic growth. Despite production weakness due to supply chain dislocation, automobile and light truck sales have already surpassed their previous cyclical peak. Home sales have held up well over the past year, despite supply shortages, while housing starts have quickly recovered to surpass their highs during the prior expansion.</div>
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<div>US capital spending has also recovered very quickly, with the exception of structures, since 2020 Q2. Meanwhile, the recovery in capacity utilisation rates and the average age of the capital stock do not currently suggest that companies will be in a hurry to add to capacity. Companies will need to learn more about the post-pandemic economic environment before committing to large capital spending projects.  </div>
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<div>The scope for the US economy to underwhelm expectations should not be under-estimated as testified by the recent decline in bond yields. A flatter yield curve due to slowing growth will, however, provide a more supportive backdrop for growth stocks.</div>

Bond investors and the Federal Open Market Committee (FOMC) expect economic growth to be strong in 2021, thereby raising inflationary risks, but the latter anticipates slower expansion next year to justify not having to invoke a monetary policy offset. Meanwhile, despite the idiosyncratic features of the Great Lockdown, there has been a general lack of commentary about the potential risks for economic outcomes to fall short of expectations.
The Great Lockdown highlighted a large divergence between notional and effective demand, a gap which was quickly reduced once restrictions on social gatherings were eased. Political decisions to combat COVID-19 over the past 14 months make forecasting the unfolding dynamics that will underpin future economic growth much more difficult than usual.
The recovery in US aggregate demand was rapid and extremely robust after an extraordinary contraction in 2020 Q2, thereby already reducing the impact of pent-up demand for big-ticket items on subsequent economic growth. Despite production weakness due to supply chain dislocation, automobile and light truck sales have already surpassed their previous cyclical peak. Home sales have held up well over the past year, despite supply shortages, while housing starts have quickly recovered to surpass their highs during the prior expansion.

US capital spending has also recovered very quickly, with the exception of structures, since 2020 Q2. Meanwhile, the recovery in capacity utilisation rates and the average age of the capital stock do not currently suggest that companies will be in a hurry to add to capacity. Companies will need to learn more about the post-pandemic economic environment before committing to large capital spending projects.  

The scope for the US economy to underwhelm expectations should not be under-estimated as testified by the recent decline in bond yields. A flatter yield curve due to slowing growth will, however, provide a more supportive backdrop for growth stocks.

Sustained Upside Surprises to US Economic Growth? Big-Ticket Spending Recoveries Suggest Otherwise