Morning Brief – A long shot

A long shot: 1/2

The world, in particular, the Northern Atlantic in a number of words that leaves you with some probability of reading the final sentence: no pressure then. Financial markets and FX in particular all tend to boil down to rates: interest rates, inflation rates, rates of return etc. The financial universe is transfixed by ratios, percentages and comparative analysis. The key comparison often overlooked day to day at the macro level is that of growth and competitiveness. Covid left the US in pole position. Markets focussed on a record low unemployment rate and strong growth rate as justifications of a strong economy.

As a result, they almost completely overlooked the uglier side of those stellar figures. For example, did you know the annual US fiscal deficit is running at around 6%? Twice that level that would be allowed by Europe’s Maastricht treaty. Of that incredible run of non-farm payroll jobs data, does 80% of jobs created since 2022 being solely within local government, leisure, education and healthcare services sound a little unsustainable? Distilling the truth from the US data triumph leads towards the conclusion that much of the transatlantic cognitive divide is one driven by little more than narrative.

Take the war in Ukraine, from the US perspective a non-NATO member being invaded by a global superpower is largely something to be paid lip service to and sadly little more. From a commercial perspective it is even a reason cited for why US oil exporters are gaining ground in key markets. For Europe, it’s a crisis right on its doorstep, a failing of its non-existent collective foreign policy and a threat to its provision of key commodities from pipeline gas to food. 260 words later and you made the final sentence, come back on Thursday for why Europe’s woes may no longer come at the comparative benefit of the US.

Discussion and Analysis by Charles Porter

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