Consumer

Concerns about the savings rate’s sustainability ease after adjusting for retirements and capital gains. The US economy continues to grow at a pace that is neither too hot nor too cold and investors should remain fully invested in risk assets.

The PCE/CPI gap is an increasingly important factor driving the near-term outlook for Fed policy. We discuss the drivers of that gap and conclude that it’s likely to narrow in the coming months.

Four decades of robust stock market gains have positioned the equity wealth effect to play a larger role in the business cycle.

China does not produce too much. It spends too little. The only viable way for China to reduce investment without raising unemployment is by lowering national savings. Doing so is likely to be politically challenging, however. This suggests that China will suffer from subpar growth and deflationary pressures for the foreseeable future.