John as per above our models didn't suggest any weakness in Q1. Q2 is when I believe we see the weakness and out work suggests the YoY rate will drop in half.

Although to be fair, one could make a strong case that looking under the proverbial GDP hood, the headline print was not nearly as attractive as it looks on the surface.

Thanks Julian. My mind was starting to join dots; slapping down the dollar, avoiding another credit event like Dec-18 and driving share markets higher. I think at worst we see a repeat of the dovish message. They started justifying this cut when they used a small deflator in the GDP print last week

Daniel the Fed has clearly shown that if faced with market or data weakness their bias is to cut. Now, the doves would argue that the data especially inflation is already sufficiently weak to justify a move. But my sense is that for the moment they don't yet command a majority. Hence, I'm not expecting too much this week. However, given what we are seeing in the models, Q2 was always going to be the economic soft patch and especially if we ever get any equity weakness the picture could change by the June meeting. As for the size of a cut I'd only expect 25bps unless stocks and the data are really collapsing.

Hi Miguel its still early days as their are LOTS of hurdles to cross before e actually see the spending, especially in terms of how it is funding and what environmental regulations are attached. BUT I believe that Pelosi is very driven to ensuring that the economy is running as hot as possible into the election. That's because she sees her biggest threat as the progressive left vs the President and a strong economy = good for incumbents. Together, with potentially Fed cuts this year, this would set us up perfectly for a repeat of the late 60's. That as I've written was an environment where stocks were the best asset. But bonds got toasted, because yields failed to rise sufficiently offset the rise in inflation.

Ive found Julians old note in my notebook and he touched on a 300B plan to rebuild America similar to the likes of the 1960s and this in turn was successful in catching the business cycle from going in to a recession. Julian, is this possible again with GDP peaking at around 3%ish will this new 2 trillion spending bill be big enough to create even more excesses in equities and spark even higher inflation?

My suggestion "The Great Inflation and Its Aftermath: The Past and Future of American Affluence". There are also some good paper https://research.stlouisfed.org/publications/page1-econ/2012/10/01/the-great-inflation-a-historical-overview-and-lessons-learned/ https://www.frbsf.org/economic-research/publications/economic-letter/2000/july/exploring-the-causes-of-the-great-inflation/