Madrid rissmiller

U.S. Economic Highlights Don Rissmiller Strategas Research Partners 212-906-0134 drissmiller@strategasrp.com

Data updated: April 13, 2015

Three Key Macro Issues • Global recoupling in a “good” way.

• Tailwind from lower energy prices & lower interest rates (with a lag).

• Monetary policy divergence: Fed needs to normalize.

Base Case: Economic Global Recoupling • • • •

No China hard landing.

Euro-area economic data improving.

Japan deflation ending?

U.S. growth remains solid after 1Q soft patch.

– Housing – Government

U.S. Housing Showing Pent-Up Demand

U.S. Govt a Source of Growth: Major U.S. Policy Risks in the Rearview Mirror • U.S. Debt Ceiling – still one more fight?

• Government Shutdown • Fiscal Drag

Bottom Line: Politicians respond to polls the way market participants respond to prices • Polling results were weak around government brinkmanship.

• Suggests less risk moving forward.

• Transition to a focus on the private sector.

– Good news: wages heading higher.

Wage Growth has Started to Pick Up Employment Cost Index: Compensation: Civilian Wor ker s % Change - Year to Year

SA, Dec-05=100

6

6

5

5

4

4

3

3

2

2

1

1 85 90 95 00 05 Sour ce: Bur eau of Labor Statistics /Haver Analytics

10

15

Unemployment Doesn’t Go “Flat”

Labor Force Participation Declining

Fed Funds Rate Odd on Both “X” and “Y” Axes Feder al Funds [effective] Rate % p. a.

12

12

10

10

8

8

6

6

4

4

2

2

0

0 85 90 95 00 05 Sour ce: Feder al Reser ve Boar d /Haver Analytics

10

15

Even the First Fed Rate Hike Will Be Notable After this Flat-line Feder al Funds [effective] Rate Differ ence - Year to Year

% p. a.

4

4

2

2

0

0

-2

-2

-4

-4

-6

-6 85 90 95 00 05 Sour ce: Feder al Reser ve Boar d /Haver Analytics

10