The Macro Report | September 2017

Growth marches on

As the summer winds down, the outlook for Fed policy, the North Korea crisis, and questions surrounding U.S. tax reform remain the chief areas of uncertainty for the global macro picture. Global growth indicators remained strong and markets returned to a risk-on appetite during July and August. August was also interesting in that risk assets such as stocks performed well, but gold and long-term Treasuries did even better. One interpretation is that a solid global economy is supporting risky asset prices, but nervousness over North Korea, and perhaps the U.S. debt ceiling expiration, prompted investors to bid for Treasuries.

An active hurricane season has caused some concern about impact on gross domestic product (GDP). Hurricane Harvey struck Texas’s oil-refining infrastructure in the Houston area, while Irma struck Florida. We estimated Harvey’s approximate GDP impact prior to the arrival of Irma, which is more difficult to estimate cleanly, but will certainly be negative. We continue to assess Irma’s effects, but as with other past hurricane events, the economic impact is temporary. The reduction in third-quarter GDP should be more than offset by a bigger recovery bounce that will be spread over the fourth quarter of 2017 and the first quarter of 2018.

Inflation in the foreground suits the Fed

Inflation in the foreground suits the Fed

We see little reason for confidence in the Fed’s view that negative U.S. inflation surprises this year are temporary and transitory.

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North Korea's new kilotons

North Korea's new kilotons

North Korea’s progress in missile and nuclear weapons testing creates a problem for President Trump, and keeps alive the risk of a dangerous miscalculation.

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Republicans riven by tax reform

Republicans riven by tax reform

Although there may be some fireworks over the debt ceiling, it remains a distraction from the key debate involving taxes and tax reform expected in the fourth quarter.

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About the macro report

The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.

Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis

Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis

Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics

Sterling Horne, Analyst
Politics and economics

Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting

Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics