Forty "W"ritings

Last week, central banks responsible for setting policy on six of the ten most-traded currencies met to decide the path forward for nearly half of the global economy.1 The Bank of Japan announced the end to the world’s last negative interest rate regime. The Federal Reserve kept interest rates unchanged as the Committee continues to see an economy that is “performing well.” The Bank of England kept interest rates unchanged but hinted rate cuts could be on the horizon amid inflation falling faster than expected. This week, we review the busy week for monetary policy decisions and what it means for markets going forward.

Last week, President Biden released his $7.3 trillion budget proposal for the fiscal year 2025 which outlined his spending and revenue plans. President Biden aims to reduce the deficit by $3 trillion over the next 10 years and increase spending on programs to assist lower income earners cope with inflation. The budget outlines plans to increase the corporate income tax rate to 28% (from 21%) and establishes a 25% income tax rate for those with wealth of at least $100 million. It is important to understand the process to finalize a government budget of this magnitude, as we are likely months away from seeing any concrete decisions made. In this weekly, we aim to outline the budget process and provide an overview of President Biden’s spending plans (as is) and their potential implications for the economy.

On March 10, 2023, Silicon Valley Bank (SVB) became the second largest bank failure in U.S. history (behind Washington Mutual in 2008). Its collapse crippled the regional banking sector and we quickly witnessed the downfall of two more banks (i.e. Signature Bank two days later and First Republic in May 2023).

Global equity markets surged in February despite hawkish Fed commentary and stubborn inflationary pressures which are calling into question the likelihood of Fed rate cuts.

In this weekly, we focused on some of the major global impacts we have seen as a result of Russia’s invasion of Ukraine.

Last week the Congressional Budget Office (CBO), a non-partisan independent organization, released its 10 year projections on the federal budget. This report is full of information about sources of government revenues, outlays and the deficit. Unfortunately, the fiscal situation in the U.S. does not look to get any better as we now have information through 2034.