There are significant differences in student loan delinquency rates by state, see chart below.
Student Loan Delinquency Rates by State
Has Trump Outsmarted Everyone on Tariffs?
As we approach the Trump administration’s self-imposed 90-day deadline for trade deals, markets are starting to speculate about what comes next. The longer uncertainty remains elevated, the more negative its impact on the economy, as shown in the chart below.
Maybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade.
Extending the deadline one year would give countries and US domestic businesses time to adjust to the new world with permanently higher tariffs, and it would also result in an immediate decline in uncertainty, which would be positive for business planning, employment, and financial markets.
This would seem like a victory for the world and yet would produce $400 billion of annual revenue for US taxpayers. Trade partners will be happy with only 10% tariffs and US tax revenue will go up. Maybe the administration has outsmarted all of us.
The Continental Shift: Europe’s Private Credit Moment
Key Takeaways
- We believe European private credit is a fast-growing market with the potential to rival the US, offering scale, diversification, and attractive risk-adjusted returns.
- With non-bank lending at just 12% in Europe vs. 75% in the US, the region is ripe for private credit expansion—especially in direct lending.
- EU reforms, Basel III, and geopolitical shifts are creating tailwinds that support capital flows into European private markets.
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CPI Data Quality Declining
To calculate CPI inflation, BLS teams collect about 90,000 price quotes every month covering 200 different item categories, and there are several hundred field collectors active across 75 urban areas.
When data is not available, BLS staff typically develop estimates for approximately 10% of the cells in the CPI calculation. However, in May, the share of data in the CPI that is estimated increased to 30%, see chart below.
In other words, a rising share of prices going into the CPI at the moment are guesses based on other data collections in the CPI.
Fixed Income Replacement as a Generator of Alpha
Record-High Foreign Ownership of the US Equity Market
Foreigners have steadily increased their holdings of US equities and currently own 18% of the US stock market, see chart below.
This is the mirror image of a trade deficit. Foreigners selling goods to the US receive dollars in return, which are then used to purchase US assets, including US equities.
If the trade deficit is eliminated, there will be fewer dollars for foreigners to recycle into the S&P 500.
US Tariff Timeline
The chart below shows a timeline of US tariffs since early February.
German Workers Work Fewer Hours
Europeans work far fewer hours per week than Americans, see chart below.
Slowdown Coming. But Not a Recession.
US economic growth is currently facing headwinds from higher oil prices, increased tariffs, the resumption of student loan payments, and higher long-term interest rates associated with the fiscal situation.
When we quantify these four drags on growth, we conclude that they are insufficient to push the economy into a recession.
In other words, these shocks are milder than those of Covid-19 and the Lehman crisis, see chart below.
However, we are closely monitoring these four risks to assess whether they become significant enough to put GDP growth into negative territory later this year—for example, if oil prices, tariffs, or long rates increase further.
Higher Oil Prices Magnifying the Ongoing Stagflation Shock
According to the Fed’s model of the US economy, a sustained $10 increase in oil prices is expected to increase inflation by 0.4% and lower GDP by 0.4%, see table below.
Tariffs also increase inflation and lower GDP growth.
Restrictions on immigration also increase wage inflation and lower employment growth.
In short, higher oil prices exacerbate the ongoing stagflation shock stemming from tariffs and immigration restrictions.
Stagflation is a problem for the FOMC when they meet next week. Higher inflation says the Fed should be hiking. Lower GDP growth says the Fed should cutting. So will the FOMC next week put more weight on the upward pressure on inflation or more weight on the coming slowdown in growth?
