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The US economy grew by 2% in the first quarter. Goldman Sachs forecasts for the second quarter are also encouraging. The Nasdaq index achieved its best first half since 1983, with a cumulative gain of almost 32% as of last Friday.
Will Biden be remembered as the best president in US history?
Not necessarily. For starters, the economy remains resilient, and markets – optimistic at the cost of future generations. Thanks to billion-dollar injections into the economy, QE, and helicopter money, interest costs on the national debt increased to $424 billion between October and May.
They are one of the largest budget items after Social Security, Medicare, and Homeland Security, and according to some estimates, could be the top item by 2030-2032. Quite an achievement, isn’t it? Maybe for XAUUSD…
Overall, it is estimated that U.S. national debt could reach 181% of GDP by 2053. The forecast also shows that the percentage of people aged 65 will increase to 22.5% of the population in 2053, up from 0.5% this year. The question remains who will pay for it then?
Nor can it be said that the Biden team has beaten inflation. One of the main contributors to Consumer Price Index (CPI) growth last year, energy prices, is restrained not by the good life but by the threat of recession.
Meanwhile, the labor market figures from the economic calendar do not consider the fact that many people are working multiple jobs to make ends meet. Yet the markets seem to overlook this reality.
Finally, problems in the banking sector persist.
Market reaction to the Federal Reserve’s stress test suggests positive results, but hedge funds are shorting regional banks given their exposure to commercial real estate. A tight monetary policy could exacerbate the situation further.
Nevertheless, Jerome Powell said that most Fed members expect to raise rates at least twice this year. The world’s other central banks are not far behind, with the leaders of the European Central Bank (ECB) and the Bank of England still taking a hawkish stance.
Christine Lagarde suggested that an ECB rate hike next month is almost inevitable. Bailey, meanwhile, pledged to do everything in his power to bring inflation back to 2% after the Bank of England surprised investors by raising rates by half a percentage point this month.
