0:10 – Webinar Introduction: Ed O’Dowd welcomes John Fagan and Brendan Walsh from Markets Policy Partners back for the October 2024 research briefing. He highlights the upcoming U.S. election and recent market movements following Joe Biden’s decision not to seek reelection.
2:28 – Federal Reserve Rate Cuts and Inflation Concerns: John Fagan begins by discussing the Federal Reserve’s decision to cut rates in September. He reviews the Fed’s cautious approach to rate cuts and anticipates a 25-basis-point cut cadence into the spring and early summer of 2025. While inflation remains a challenge, the outlook is leaning toward “stagflation lite.”
6:45 – Neutral Interest Rate Debate: Brendan Walsh explains the internal Fed debate over the “neutral rate,” with varying opinions on where rates should normalize. He emphasizes this as a key focus rather than the frequency of rate cuts.
7:58 – 2024 Election Scenarios: John Fagan revisits predictions for the upcoming U.S. election, outlining a narrow lead for Kamala Harris. He explores the potential market impact of a Harris-Walls victory versus a Trump win, noting potential deregulatory policies and tax cuts under a second Trump term.
15:29 – ECB Update: The discussion shifts to the European Central Bank (ECB) and its policy approach compared to the Fed. Fagan notes that the ECB has been more cautious, potentially keeping its easing path flexible to handle trade disruptions or tariffs under a Trump administration.
18:06 – China Economic Outlook: Fagan shares skepticism about China’s ability to stimulate global growth, citing the inefficacy of past fiscal stimulus measures and ongoing struggles in China’s property sector.
22:55 – Oil Markets Update: Fagan addresses how oil prices have remained stable despite escalating tensions in the Middle East, attributing this to increased U.S. production and coordination between the U.S. and Saudi Arabia.
26:17 – U.S. Bank Earnings: Walsh reviews the strong Q3 earnings from U.S. banks, driven by steady net interest margins and a resilient U.S. consumer. Pressures are emerging, however, at the lower end of the income spectrum.
27:30 – Challenges around U.S. Policy Implementation: Fagan highlights inefficiencies in the implementation of U.S. policy and funding decisions, particularly in getting infrastructure and inflation reduction programs to impact key regions.
31:45 – Taxing Unrealized Capital Gains: In response to an audience question, Fagan dismisses the proposal to tax unrealized capital gains as unworkable and politically unlikely, especially given opposition from centrist Democrats and logistical challenges in implementation.
35:59 – Closing Remarks: The session wraps with a focus on the complex geopolitical landscape that the next president will be grappling with, including tensions between Israel, Iran, and China.
