Processing Powell’s Rout

The US is going it alone. The rest of the world isn’t so synchronized like it was, purportedly, in 2017. No matter, at least for Americans. Even Europe, last year’s poster boy for what this upswing was going to accomplish, has thoroughly disappointed. The United States is just going to have to leave everyone else behind with no regrets.

The Eurozone, Japan and select emerging markets all seem to be struggling economically with low inflation levels, poor policy responses, and low demand. Meanwhile, the U.S. keeps posting surprisingly strong economic numbers.

Consumer confidence, manufacturing momentum and services strength have converged into an economic growth rate well above 3 percent for the past six months, defying the gravity that seemingly grounds everyone else.

The above wasn’t written recently, however, though it could easily pass for current commentary. It speaks to us from out of time, penned in December of 2014. The theme of US “decoupling” was very strong then, too. Even the manic upward slope of the dollar was, for a while readily embraced as a good thing.

The team of economists at Cornerstone Macro, led by veteran Nancy Lazar, notes that the U.S. consumer is actively benefiting from the turmoil happening in Asia and Europe.

While for some, especially Economists, they never learn, mostly it’s just the tantalizing idea that this time will be different. OK, 2015 sure didn’t turn out the way anyone wanted and decoupling was an incorrect explanation for differences in timing, but 2018 isn’t 2015. They may share the same direction for the dollar, but tax cuts baby!

The funny thing about them is that in early 2015, during the last decoupling hysteria, the oil crash was being talked about in the same way. In May of that year, Janet Yellen explained to Rhode Islanders the good parts of that rising dollar:

In addition, the drop in oil prices amounts to a sizable boost in household purchasing power. The annual savings in gasoline costs has been estimated at about $700 per household, on average, and savings on heating costs–especially here in the Northeast, where it was so cold this winter–are also large.