Markets in the month ahead, Elise, global investment Strategist at JP Morgan Private Bank let's go back to Friday, Elise the Fed sees that number – the GDP number, was it Thursday? I don’t know. I don't know they see it and suddenly it's, wow, 2.6%, that's much better than a couple of down quarters So, does that mean, oh my god, we got to go another 0.75 at least twice? Or do they see that friendly inflation figure that was in there? What do you think was more important to their viewpoint? Well, I don't necessarily think that we should miss the forest for the trees, so to speak. That likely was kind of a bump in the overall context of the slump, as it pertains to economic growth, to the details of that. You know that a lot of the upside was driven by the trade component of GDP, and You've still got these indicators like housing, which, at this point, you know, within the GDP report, showed a decline of about 25%. Thinking about what we learned on Friday from the employment cost index, you know, sure, we're starting to see some price pressures roll over, but that level of price pressure is still well above what would be consistent with the Fed's mandate. So we're not expecting the Fed to necessarily shift course and very much still think they're on track for 75 basis points at this meeting and likely 50 basis points in December, right in line with what they put out in the SEP a couple of months ago.
I can see it that way, as kind of a reversion to the mean, in terms of both the 2.6% and the inflation number not being quite as hot, but in a perfect world, those two things together are not stagflation, they're what we want, they’re economic growth with maybe cooling inflation. And we have been so worried about stagflation, you know, that I’ll almost take it, at least even if it's just a blip, as you said, or a bump, but even when you said 50 basis points, I've been calling that a swivel. If it's not two straight 75s, it might not be a pivot, but the rest of the world seems to be swiveling a little too. Isn't the writing on the wall? that maybe we're making progress in what the fed is trying to do and maybe we're, we don't have to go the worst-case scenario is about how far they go that may not come to pass.
“there's a high probability that the U.S. economy doesn't get out of this unscathed”
Yes, and I do think that you saying, I don't want to call it a pivot, I’d rather call it a swivel, is you know right on course. We've known that the fed had this intention of front-loading policy rate hikes, and it seems like we're kind of at the end of that period of front-loading. But to be clear, tightening is not over yet. Our base case expectation is that the terminal rate gets to 4.75. We haven't erased the probability of a soft landing from kind of our scenario survey analysis but the base case is with the amount of tightening that's been put into play. So far year to date with the weakness you're seeing in areas of the economy like the housing market, we continue to think that there's a high probability that the U.S. economy doesn't get out of this unscathed, and you know, we're kind of positioning for the heightened possibility of a U.S. recession starting in the beginning of next year.
Questions:
Part 1: Comprehension
Watch and summarize the video thinking of who, what, when, where & why.
Part 2: True or False Questions
a) True or false – The GDP number is better than it was a couple of weeks ago. T/F
b) True or False – The better GDP number was mainly due to trade. T/F
c) True or False – Elyse believes that the current market situation is more of a swivel than a pivot. T/F
d) True or False – The American economy is currently experiencing a recession. T/F
Part 3: Guess the meaning of unknown vocabulary
a) "Miss the forest for the trees" (0:36 min)
b) "Shift course" (1:17 min)
c) "Writing on the wall" (2:13 min)
d) "Unscathed" (3:14 min)
Part 4: Dictation
a) Fill in the blanks (0:40 - 0:48 minutes) That likely ________________________________________________ to the details of that.
b) Fill in the blanks (2:06 - 2:14 minutes) If it's not____________________________________________________a little too.
c) Fill in the blanks (2:52 - 3:02 minutes) We haven't ____________________________________________________play.
Part 5: Talking Points
Part 6: Role play Scenarios
Scenario 1: Economic Forecast Discussion
Elise, a global investment strategist, and Mark, a portfolio manager, discuss the latest economic forecast for the coming year.
Scenario 2: Fed Policy Meeting
2 central bankers meet to discuss the possibility of further interest rate hikes, and debate whether to pivot or swivel their policy.
Scenario 3: Investment Portfolio Review
Elise meets with a client to review their investment portfolio and discuss potential adjustments given the current economic climate.
Scenario 4: Cost of living
Two colleagues discuss the rising cost of living and the impact that it has had on their family life. They give each other tips and advice on how to save money and spend less.
Part 7: Writing Activity
Imagine your friend has come to you with some financial troubles. Could you write a short paragraph giving them some basic advice on how to save money and spend less.
Part 8: Critical Thinking - Rising cost of living
Objective: To come up with a policy to tackle the rising cost of living in your country.
In groups come up with a 5 point policy that will help tackle the rising cost of living in your country.
Outline your plan in a presentation taking a Q&A session at the end.
Then as a class, create the best 5 point policy based on all the presentations.
Answers:
Part 1: Comprehension
This is a news report from CNBC in America and they have invited Elyse Ausenbaugh, a global investment strategist at JPMorgan private bank on the show to discuss her forecast for future interest rate hikes from the Federal Reserve. The reporter first starts by proposing that there seem to be some better results lately. However, Elyse was quick to say that this seems to be a kind of bump in the overall context of the slump. She further proposes that things such as housing showed an overall 25% decline and due to the employment cost index figures that were recently released there are some price pressures. After further questions from the reporter, Elyse concludes that we are seeing weakness in all areas of the economy and that America will most likely enter a period of recession at the beginning of next year.
Part 2: True or False
A: True B: True C: True D: False
Part 3: Guess the meaning of unknown vocabulary or phrases
a) "Miss the forest for the trees" Answer: I think this means that we should not misunderstand the larger situation of a problem because of a few smaller parts. In the video, the financial expert is stating that the GDP figure looks okay this week but this doesn’t give the overall picture.
b) "Shift course" Answer: This means to change direction or plan because in the video the speaker talks about how the Fed is on track, so she doesn’t expect to see major changes in their policy.
c) "Writing on the wall" Answer: I think that this means that there are clear signs that something bad will happen because in the video the reporter is making the point that there are too many negative factors for the market to have any chance of improving, so he is asking the expert if there is any chance that the market can get through the difficult times.
d) "Unscathed" Answer: I think this means without suffering any damage or harm because in the video the expert states that although there could be some improvement in the market it’s very unlikely that the economy will avoid a recession.
Part 4: Dictation
a) Fill in the blanks (0:40 - 0:48 minutes) That likely was kind of a bump in the overall context of the slump, as it pertains to economic growth, to the details of that.
b) Fill in the blanks (2:06 - 2:14 minutes) If it's not two straight 75s, it might not be a pivot, but the rest of the world seems to be swiveling a little too.
c) Fill in the blanks (2:52 - 3:02 minutes) We haven't erased the probability of a soft landing from kind of our scenario survey analysis, but the base case is with the amount of tightening that's been put into play.
Part 7: Writing (example)
Hello friend, when money is tight, you can do a few things to help. First, make a budget. This means writing down what you earn and what you spend. Focus on important things like your home, bills, and food. Try not to spend on things you don't need, like eating out a lot. You can use apps to help track your money. Next, try to pay off any big debts, especially those with high interest. Also, when you shop, buy cheaper brands and look for sales or coupons. And, if you can, save a little money each time you get paid. Even a small amount is good. Small steps can make a big difference.
