Insights and Market Perspectives

CONGRESS IS STUMBLING TOWARD PASSAGE of legislation late this week that would provide enormous aid to Ukraine, Israel and Taiwan. It’s a VERY messy process — typically — that has obscured the major development for financial markets: red hot economic growth, far exceeding expectations.

WE’LL GET TO THE CONGRESSIONAL BRAWL in a second, but first — dramatic economic growth is having a major impact on interest rates, with the Atlanta Fed GDP Now predicting economic growth at 2.8%, after yesterday’s blowout retail sales report.

EVEN CHINA, considered a basket case a few months ago, is blasting off — with Beijing reporting 5.3% first quarter economic growth.

WITH THE U.S. TEN YEAR BOND YIELD now above 4.5%, this has to be a shock for the Federal Reserve, which may be frozen for months to come — unable to cut rates as long as the economy is growing above trend with inflation not falling to the Fed’s 2% goal.

THERE SURELY WON’T BE ANY FISCAL RESTRAINT, as Congress moves awkwardly toward passage of a nearly $100 billion spending package for allies.

THIS IS A VERY FLUID fluid environment — even a Tik-Tok ban is included — with House Speaker Mike Johnson preparing four separate bills in a dizzying process that may require support from Democrats — which could cost Johnson his job.

BOTTOM LINE: This is sausage-making at its ultimate, as Democrats prepare to bail out Johnson, as angry right wingers demand provisions to protect the border, and as aid seems increasingly likely — surely for Israel, probably for Ukraine. It’s only Tuesday, there’s a long way to go; details won’t come into focus for a few more days.

IN THE MEANTIME, THE ECONOMY CONTINUES TO ROAR — it’s too strong, in our opinion, to be sustainable.

THESE DRAMATIC STORIES MAY HAVE TO TAKE A BACK SEAT as the gleeful media is obsessed with the Donald Trump trial. The buzz after the first day was whether Trump dozed off yesterday during the jury selection process, Our advice to Trump — get some espresso, the last thing you want is opponents calling you “sleepy Don.”

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Statistics agency says economy has made ‘good start’ to the year under the leadership of Chinese President Xi Jinping.

China’s economy grew faster than expected in the first three months of the year, a boost for policymakers grappling with a property-sector crisis, weak consumer demand and mounting government debt.

Gross domestic product (GDP) grew by 5.3 percent in the first quarter, data released by the National Bureau of Statistics (NBS) showed on Tuesday, comfortably above forecasts and up from a 5.2 percent expansion in the previous quarter.

By sector, industrial production and agriculture grew by 6.1 percent and 3.8 percent, respectively, while services grew by 5 percent, according to NBS data.

The NBS said in a statement that the economy had made a “good start” under “the strong leadership” of the Central Committee of the Communist Party of China and President Xi Jinping.

“As a result, the policies continued to take effect, production and demands maintained stable and witnessed an increase, employment and prices were generally stable, market confidence continued to boost, and high-quality development made new progress,” the statistics agency said.

The stronger-than-expected figures came days after China reported that exports and imports declined 7.5 percent and 1.9 percent, respectively, in March, missing expectations.

The world’s second-largest economy has struggled to sustain a recovery from the COVID-19 pandemic amid a range of longstanding structural challenges, including a hugely indebted real estate sector and a shrinking population.

Fitch Ratings earlier this month downgraded China’s sovereign credit outlook to negative, citing “increasing risks to China’s public finance outlook” as Beijing attempts to move away from real estate-led growth.

Beijing last month set a 5 percent growth target for 2024, a rate that would beat most developed economies but be among the country’s slowest expansions since 1990.

Officials have unveiled a number of fiscal and monetary policy measures to boost the economy, including $1.8 trillion in spending on major construction and infrastructure projects.