Ethan Harris

The Fed's Rate Hike Plans Are Now "In Tatters" - What Wall Street Thinks

Any “faint prospect” of a Fed July rate increase has entirely vanished, ING economist Rob Carnell wrote in note adding that the longstanding ING call for Sept. hike looks to be “hanging in tatters.”  Here are more comments, courtesy of Bloomberg, from Wall Steet's so-called experts, none of whom predicted the actual a Brexit outcome, about U.S. monetary policy outlook following the outcome of the U.K. referendum.

Don't Expect Much From Yellen's Speech Today

Anyone hoping for some clarity on the Fed's next steps from Yellen's speech later today, don't hold your breath. If anything, Yellen will do more of the same, which as BofA summarizes, is the following: "It is fair to say that many clients are a bit confused and frustrated with Fed communication. The Fed seems to be constantly changing its focus from one meeting to the next. They seem to regularly promise hikes, only to back off at the last second."

Atlanta Fed Slashes Q1 GDP Estimate To Only 0.1%

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.1 percent on April 8, down from 0.4 percent on April 5. After this morning's wholesale trade report from the U.S. Bureau of the Census, the forecast for the contribution of inventory investment to first-quarter real GDP growth fell from –0.4 percentage points to –0.7 percentage points.

"Perma-bears" 2 - BofA Economist 0

"Capital markets seem to be pricing in a 50% or higher probability of a US recession. Our rates team has developed an adjusted yield curve measure that signals a 68% probability of recession."

Bank Of America Admits The U.S. May Already Be In A Recession

"The US Treasury curve is still steep by historical standards. Taken at face value, this may suggest recession odds are small. However, we argue this logic is flawed because the curve is structurally steep when the Fed Funds rate is close to zero. When adjusted for the proximity of rates to zero, the curve may already be inverted and therefore may already be priced for a recession./// Implied recession odds are as high as 64% if the adjusted OIS curve is used"

"Reset" Or "Recession"?

Following years of QE-inspired excess returns, investors in 2016 suddenly find themselves embroiled in a broad and brutal bear market. The 10-year rolling return loss from commodities (-5.1%) is currently the worst since 1938, and equal-weighted US stock index down 25% from recent highs. However, in BofAML's view, the pertinent question for investors is whether the current bear market represents a healthy "reset" of both profit expectations and equity and credit valuations, or more ominously, the onset of a broader economic malaise that will require a major policy intervention in coming months to reverse.

Wall Street Economists React To The Fed's Statement

After the Fed's statement, one thing was clear: the career economists at the Marriner Eccles building are very confused, admitting to hiking rates for the first time in nine years "even as economic growth slowed late last year". But more confused are the Wall Street economists who follow the Fed and are expected to interpret what the Fed says, means and hints, especially when said Fed has no clue what is going on, like right now. So while their opinions are utterly worthless, for the record, here is what the economisseds see in today's 558 words of sheer Fed confusion.

"Perma-bears" 1 - BofA Economist 0

Eight months ago, Bank of America chief economist Ethan Harris triumphantly declared victory over the "perma-bears." Today, the "perma-bears" get the last laugh.

Global Trade (Still) In Freefall: Imports Collapse At Largest Three US Ports

For the latest bit of evidence that global trade is indeed in free fall, look no further than the container terminals at the ports of Los Angeles, Long Beach, Calif. and around New York harbor which handle more than 50% of seaborne freight coming into the US. As it turns out, “peak” season turned out to be anything but.

Is The Oil Crash A Result Of Excess Supply Or Plunging Demand: The Unpleasant Answer In One Chart

Courtesy of the following chart by BofA, we have the answer: while for the most part of 2015, the move in the price of oil was a combination of both supply and demand, the most recent plunge has been entirely a function of what now appears to be a global economic recession, one which will get far worse if the Fed indeed hikes rates as it has repeatedly threatened as it begins to undo 7 years of ultra easy monetary policy.