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MACROECONOMICS by Marc Chandler


FX


Long-Term Macroeconomic Outlook


The winding down of the North’s summer provides a suitable time to consider not the near-term outlook, which many investors do on a daily basis, but to reflect on where we are heading down the road a bit. What will the next 18-24 months hold? Of course, we harbor no illusions of prescient vision and accept the hazards of the assignment and so should the reader.


Te effect of monetary tightening and fiscal stimulus running its course, it seems reasonable to expect the end of the US business cycle. Te Fed’s cycle will be completed. Allowing a modest gap between the last hike and the first cut could allow for a rate cut ahead of the November 2020 election. In some ways, President Trump’s criticism of the Fed policy (see article page 45)


now will deter claims later that Fed easing is politically-motivated.


Evidence of late cycle behavior should be expected to accumulate. Tese include the 12-month moving average of non-farm payrolls and auto sales. While rising delinquency rates on credit cards and other debt-stress measures will rise, the end of the business cycle need not


mark a credit crisis.


In some ways,


an important, even if overlooked characteristic of the economy is that aſter the violent disruptions of the Great Financial Crisis, the Great Moderation, characterized by relative longer and flatter business cycles remains intact.


However, around the time we expected the Federal Reserve


FX TRADER MAGAZINE October - December 2018 7


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