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IMF-The US Economy's Inflation Challenge
July 12, 2022-The US economy has recovered quickly from the pandemic but the bounce back in demand has stressed supply chains and caused inflation to rise sharply. The economy is expected to slow, as the Federal Reserve (the Fed) continues to tighten monetary policy and COVID economic relief programs come to an end, bringing core Personal Consumption Expenditure (PCE) inflation down to the Fed's 2 percent medium-term target by late 2023.
However, if inflation is more persistent than expected, the Fed will need to tighten more, which will further slow the economy.
The IMF's annual review of the US economy focuses on the policies needed to return inflation to the Fed's medium-term target. Most workers' wages have failed to keep up with inflation, eroding the purchasing power of households and causing significant hardship. Although increases in gasoline and food prices have been affected by global events, the prices of a broader range of items have also risen strongly, including housing and transportation. If left unchecked, these price increases could become long lasting. In our assessment, we conclude that the Fed should act quickly and assertively to tackle inflation and restore price stability.
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Source: IMF
CBO-Monthly Budget Review: June 2022
July 11, 2022--Summary
The federal budget deficit was $514 billion in the first nine months of fiscal year 2022 (that is, from October 2021 through June 2022), the Congressional Budget Office estimates. That amount is less than one-quarter of the $2.2 trillion shortfall recorded during the same period in 2021.
Revenues were $779 billion (or 25 percent) higher and outlays were $945 billion (or 18 percent) lower than during the same period a year ago.
The deficit at this point last year was much larger because of spending in response to the coronavirus pandemic-mostly for the recovery rebates (also known as economic impact payments), unemployment compensation, pandemic relief through the Small Business Administration (SBA), and the Coronavirus Relief Fund-and because revenues were lower.
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Source: Congressional Budget Office (CBO)
Franklin Templeton to Rename U.S. ETF Platform for Better Brand Alignment
July 11, 2022--Firm seeks to best leverage larger brand presence for evolving ETF lineup
Franklin Templeton today announced it will rename 13 of its ETFs in the U.S. This will include removing the LibertyShares, Liberty and LibertyQ naming conventions from the platform effective August 1, 2022. In addition, the firm recently announced plans to reposition and rename four index-based ETFs.
"Since we officially launched our ETF business more than five years ago, we have been very pleased with the key milestones we've reached in our expansion. We believe these updates will help bring clarity to our clients now that we have built out such a robust suite of offerings across both indexed and active ETFs" said Patrick O'Connor, Head of Global ETFs.
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Source: franklintempleton.com
Leveraged ETFs Betting Against US Stocks Draw in $1.4 Billion
July 11, 2022--Short S&P 500 fund sees 12 days of inflows, Nasdaq racks four
Investors 'getting more bearish,' Interactive Brokers says
Traders are piling into exchange-traded funds that bet against US stocks as the risk of recession and disappointment from the upcoming earnings season bolsters bearish sentiment in the market.
Investors added a net $247.5 million to the ProShares UltraPro Short QQQ ETF (ticker SQQQ) in the latest session tracked by Bloomberg. This was the biggest one-day increase in over a month for the fund --which is a bet against the tech-heavy Nasdaq 100--and the fourth straight day of inflows, which totaled roughly $518 million.
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Source: bloomberg.com
Minutes of the Federal Open Market Committee, June 14-15, 2022
July 6, 2022--Developments in Financial Markets and Open Market Operations
The manager of the System Open Market Account (SOMA) turned first to a discussion of financial developments.
Over the intermeeting period, there were significant swings in asset prices, and financial conditions tightened, on net, as market participants assessed incoming information about the economy.
In the United States, near-term policy rate expectations shifted markedly toward the end of the period, particularly after the release of the May consumer price index (CPI) report. Ahead of the release of the report, market expectations reflected a broad consensus that there would be 50 basis point rate increases at both the June and July FOMC meetings.
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Source: federalreserve.gov
CBO-H.R. 5910, Holding SPACs Accountable Act of 2021
July 6, 2022--Summary
H.R. 5910 would exclude all special purpose acquisition companies (SPACs) from safe harbor protections. (SPACs are companies without commercial operations that exist solely to raise capital through initial public offerings to later engage in mergers or acquisitions.)
Under current law, most public companies are shielded from liability by safe harbor protections when prospective information published by the company-such as projections of revenues, income, and earnings per share-proves to be false or misleading. Currently, only SPACs that issue penny stocks, equity securities that trade for less than $5 per share, are excluded from those protections.
CBO estimates implementing the bill would cost the Securities and Exchange Commission (SEC) less than $500,000.
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Source: Congressional Budget Office (CBO)
Global X ETFs Expands its Lineup of Options-Based Strategies with Two Innovative Actively Managed Funds
July 6, 2022--Global X ETFs, the New York-based provider of exchange-traded funds (ETFs), today announced the launch of the Global X Interest Rate Hedge ETF (IRHG) and the Global X Interest Rate Volatility & Inflation Hedge ETF (IRVH). These two funds represent Global X's latest additions to its options-based ETF suite, which now includes 14 funds totaling over $9.7 billion in assets under management.[i]
Currently, inflation seems to be spreading across the entire supply chain, from components and commodities, all the way to end consumer products. With a tight labor market, high energy prices, supply chain issues and a strong consumer, elevated levels of inflation are unlikely to dissipate in the near-term. In response to this persistently high inflation, central banks are aggressively raising rates and rolling back bond buying programs. Rising interest rates are increasing costs for companies globally and putting pressure on the broader markets
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Source: Global X Management Company LLC
Fidelity to open direct indexing to the masses
July 5, 2022--Once limited to wealthy investors, the offering requires users to invest just $1 in each stock
Asset manager Fidelity plans to roll out a direct indexing tool in the US that will require investment of as little as $1 per stock, in a significant move to open up the concept to small investors.
The direct indexing concept, which allows investors to create bespoke portfolios tailored to their personal preferences, is widely seen as a long-term threat to traditional pooled vehicles such as mutual and exchange traded funds.
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Source: ft.com
If the U.S. Is in a Recession, It's a Very Strange One
July 4, 2022--Economic output is down but the job market is strong, unlike in previous recessions
The U.S. economy has experienced 12 recessions since World War II, and each one included two features: Economic output contracted and unemployment rose.
Today, something highly unusual is happening
Economic output fell in the first quarter and signs suggest it did so again in the second. Yet the job market showed little sign of faltering during the first half of the year. The jobless rate fell from 4% last December to 3.6% in May.
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Source: wsj.com
IMF Working Paper-From Polluting to Green Jobs: A Seamless Transition in the U.S.?
July 1, 2022--Summary:
What are the implications of the needed climate transition for the potential reallocation of the U.S. labor force? This paper dissects green and polluting jobs in the United States across local labor markets, industries and at the household-level. We find that geography alone is not a major impediment, but green jobs tend to be systematically different than those that are either neutral or in carbon-emitting industries.
Transitioning out of pollution-intensive jobs into green jobs may thus pose some challenges. However, there is a wage premium for green-intensive jobs which should encourage such transitions. To gain further insights into the impending green transition, this paper also studies the impact of the Clean Air Act. We find that the imposition of the Act caused workers to shift from pollution-intensive to greener industries, but overall employment was not affected.
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Source: imf.org
