Month: August 2022

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

Housing starts in the US fell 9.6%, lower than the consensus, but with building permits holding up. But with housing affordability at multi year lows, with savings depleted, a pessimistic jobs outlook, and new mortgage demand at 22 year lows, it’s difficult to be bullish in the sector for the time being.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

Housing starts in the US fell 9.6%, lower than the consensus, but with building permits holding up. But with housing affordability at multi year lows, with savings depleted, a pessimistic jobs outlook, and new mortgage demand at 22 year lows, it’s difficult to be bullish in the sector for the time being.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

In the meantime, existing home sales fell for the sixth straight month by 6% in July on affordability concerns, and US housing prices are edging down from record highs amid lower demand. Existing home sales are down 20% Y/Y.

Housing starts in the US fell 9.6%, lower than the consensus, but with building permits holding up. But with housing affordability at multi year lows, with savings depleted, a pessimistic jobs outlook, and new mortgage demand at 22 year lows, it’s difficult to be bullish in the sector for the time being.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

In the meantime, existing home sales fell for the sixth straight month by 6% in July on affordability concerns, and US housing prices are edging down from record highs amid lower demand. Existing home sales are down 20% Y/Y.

Housing starts in the US fell 9.6%, lower than the consensus, but with building permits holding up. But with housing affordability at multi year lows, with savings depleted, a pessimistic jobs outlook, and new mortgage demand at 22 year lows, it’s difficult to be bullish in the sector for the time being.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

A recent key finding from a survey by consulting firm PWC, which polled 700 US executives and board members across of range of industries, was that about 50% of respondents said they are reducing headcount or plan to do so, and have also implemented hiring freezes. About 40% of the respondents said they are rescinding job offers and eliminating sign-on bonuses.

In the meantime, existing home sales fell for the sixth straight month by 6% in July on affordability concerns, and US housing prices are edging down from record highs amid lower demand. Existing home sales are down 20% Y/Y.

Housing starts in the US fell 9.6%, lower than the consensus, but with building permits holding up. But with housing affordability at multi year lows, with savings depleted, a pessimistic jobs outlook, and new mortgage demand at 22 year lows, it’s difficult to be bullish in the sector for the time being.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

A recent key finding from a survey by consulting firm PWC, which polled 700 US executives and board members across of range of industries, was that about 50% of respondents said they are reducing headcount or plan to do so, and have also implemented hiring freezes. About 40% of the respondents said they are rescinding job offers and eliminating sign-on bonuses.

In the meantime, existing home sales fell for the sixth straight month by 6% in July on affordability concerns, and US housing prices are edging down from record highs amid lower demand. Existing home sales are down 20% Y/Y.

Housing starts in the US fell 9.6%, lower than the consensus, but with building permits holding up. But with housing affordability at multi year lows, with savings depleted, a pessimistic jobs outlook, and new mortgage demand at 22 year lows, it’s difficult to be bullish in the sector for the time being.

Fitch Ratings said that “while a severe downturn in US housing has increased”, the firm expects only a modest single digit pullback in 2023 but expects additional housing activity pressure in 2024.

In a statement, NAR chief economist Lawrence Yun said “We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices”. True, however slower building activity will contribute to slower economic activity in the US across the board.

And in the most recent FOMC minutes, the Fed said that the economy was “noticeably weaker” in July than in June. Please note that June was already a weak month, and the fact that July was noticeably weaker is probably something that surprised Fed members and economists.

And we also got this in the minutes:

“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the Committee could tighten the stance of policy by more than necessary to restore price stability.”

Please note the long-term lag. In other words what the Fed does today does not have an immediate impact. So, the Fed does not really know if policies in place are too tight, and will only realize this several quarters down the road, at which point it might need to unwind a lot of the policies in place today, among other things its insistence on quantitative tightening.

So, in a nutshell, the Fed is getting what it wants, and that is a slower US economy. While a soft landing is still debatable, what is noticeable is that any stone you turn, we will see economic weakness in the US economy. At the end of the day, the Fed better be careful what it wishes, because while many aspects of the US economy still seem strong, things can get ugly very fast, even perhaps sooner than most economists think.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

By default, increases in hourly compensation increase unit labor costs, and increases in productivity tend to reduce them. Nonfarm unit labor costs increased 10.8% for Q2 reflecting a 5.7% in hourly compensation and a 4.6% decrease in productivity.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

By default, increases in hourly compensation increase unit labor costs, and increases in productivity tend to reduce them. Nonfarm unit labor costs increased 10.8% for Q2 reflecting a 5.7% in hourly compensation and a 4.6% decrease in productivity.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

By default, increases in hourly compensation increase unit labor costs, and increases in productivity tend to reduce them. Nonfarm unit labor costs increased 10.8% for Q2 reflecting a 5.7% in hourly compensation and a 4.6% decrease in productivity.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

By default, increases in hourly compensation increase unit labor costs, and increases in productivity tend to reduce them. Nonfarm unit labor costs increased 10.8% for Q2 reflecting a 5.7% in hourly compensation and a 4.6% decrease in productivity.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.

As the chart below shows, nonfarm labor productivity in the US has been drifting downwards for the past 2 years. In fact, the 2.5% Y/Y decline in labor productivity is the largest decline in the series since records began in 1948.

By default, increases in hourly compensation increase unit labor costs, and increases in productivity tend to reduce them. Nonfarm unit labor costs increased 10.8% for Q2 reflecting a 5.7% in hourly compensation and a 4.6% decrease in productivity.

Unit labor costs in the US increased 9.5 percent over the last four quarters, the biggest rise since the 10.6% increase in the first quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity.

Obviously listed companies are more productive than the US economy as a whole, however when labor and input costs rise, it will pressure even them. And when the decline in Y/Y labor productivity is the biggest print since 1948, this might mean something that we are not fully grasping yet.

Please note that the world is currently experiencing a plethora of issues that could affect long term productivity trends and profitability.

High energy prices – Not just because of the Russian- Ukraine war, but also because of a rush towards clean energy production and ESG standards.

Political tensions – While tensions between China and the US have been going on for several years, we now have grievances between China and Taiwan. Also, relations between Russia and Western counties are not expected to normalize soon. As a result, many companies are diversifying supply chains or are relocating them in their home countries. New terms such as onshoring and friend-shoring are coming into play. But this relocation of supply chains will not happen overnight and might take a decade or more to play out. Supply-chain relocation, and building new manufacturing facilities are both expensive and inflationary

Covid Pandemic – For the most part Covid is behind us, but China is still struggling. There is also the chance that a new pandemic arises that might be worse than Covid. The recent monkeypox outbreak is a small example, even if it is not a global threat as Covid was.

All the above issues increase input costs as well as labor costs and reduce overall productivity. And while the likelihood of a major war between Russia and the West, or hostilities with China are perceived to be low, nevertheless the market prices these possibilities in the multiple.

The bottom line is that, while there are many factors that have contributed to the weak productivity numbers in the US, we must ask ourselves if the current geopolitical skirmishes are something of a longer-term trend that might act as a tailwind for global growth and profitability from now on.

This is very difficult to answer, but if the answer is yes, risk assets might be reprised with a lower multiple. And this is something that investors need to weigh very careful going forward.