Economic Overview - Russia's nominal GDP stands at $2.2 trillion, comparable to its level in 2013, prior to the annexation of Crimea [1] - The economy contracted by 1.4% in 2022 but is projected to grow by 4.1% in 2023 and 4.3% in 2024, with a forecasted slowdown to 1.0% growth this year [8] Sector Performance - Non-military sectors of the economy have contracted by 5.4% since the beginning of the year, indicating significant economic strain [2] - The construction industry is facing a downturn, with cement consumption expected to fall below 60 million tonnes, a level not seen since the COVID pandemic [5] Labor Market Adjustments - Major companies, including Cemros, Russian Railways, and GAZ, have implemented a four-day workweek to manage labor costs amid economic challenges [6][12] - The unemployment rate has reached a record low of 2.1%, despite the economic difficulties [8] Government Intervention - The Russian government has been compelled to provide support across various sectors, including coal and metals, to prevent mass layoffs [17] - In previous economic downturns, state support was extended to major employers to mitigate discontent in industrial towns [16] Industry-Specific Challenges - The coal sector is particularly affected, with reports of 19,000 layoffs in the first half of 2025 and warnings of potential bankruptcies among coal enterprises [18][19] - The steel industry is also under pressure, with discussions of a moratorium on bankruptcies and indications of workforce reductions without mass layoffs [21][22]

Economic Overview - Russia's nominal GDP stands at $2.2 trillion, similar to its level in 2013, prior to the annexation of Crimea [1] - The economy contracted by 1.4% in 2022 but is projected to grow by 4.1% in 2023 and 4.3% in 2024, with a forecasted slowdown to 1.0% growth this year [8] Sector Performance - Non-military sectors of the economy have contracted by 5.4% since the beginning of the year, indicating significant economic strain [2] - The construction industry is facing a downturn, with cement consumption expected to fall below 60 million tonnes, a level not seen since the COVID pandemic [5] Labor Market Adjustments - Major companies, including Cemros, Russian Railways, and GAZ, have implemented a four-day workweek to manage labor costs and avoid layoffs [6][12] - The unemployment rate has dropped to a record low of 2.1%, despite the economic challenges [8] Government Intervention - The Russian government has been compelled to provide support across various sectors, including coal and metals, to prevent mass layoffs and economic discontent [17][16] - In previous downturns, state support was extended to major employers, indicating a pattern of intervention during economic crises [16] Industry-Specific Challenges - The coal sector is particularly affected, with reports of 19,000 layoffs in the first half of 2025 and financial health deteriorating for many enterprises [18][19] - The steel industry is also under pressure, with discussions of a moratorium on bankruptcies and a quiet cutback in operations due to high interest rates and weak demand [21][22]

Market Trends & Auction Expectations - The market anticipates all auctions to perform well, with a tendency for the street to push yields higher [1] - Current long bond rates present buying opportunities [2] Government Shutdown Impact - Historically, government shutdowns have had minimal impact on markets, averaging 3 to 30 days in duration, as any effects are temporary and borrowed from the future [3] - The speaker believes being in the dark on economic numbers is delaying the inevitable, which is the Fed has to cut rates more [4] Corporate Bond Spreads & Investment Strategy - Corporate bond spreads are currently historically tight, implying high prices [4] - The speaker suggests that investors are likely to lose money in the corporate bond market, regardless of quality, over the next year [6] - The speaker recommends focusing on the highest quality corporate bonds to maintain value, or considering mortgage-backed securities or treasuries as alternatives [6] Mortgage-Backed Securities (MBS) - Low coupon mortgages created during COVID, with rates at 2% to 2.5%, are now at low dollar prices, around $80 [7] - These mortgages are experiencing either no negative convexity or positive convexity due to prepayments, a unique situation [8] Economic Concerns & Rate Cuts - Despite AI and capex spending, the speaker expresses concerns about the overall economy, citing weakness in housing, commercial real estate, wage growth, and employment [9][11] - The speaker believes the Fed is cutting rates because the economy needs it, not as an insurance measure [11] Stock Market Illusion - The speaker views the strong stock market as an illusion, anticipating a realization that AI investments may not yield expected returns [13][14]

Inflation Concerns - Service sector inflation is showing signs of life, with prices paid by service sector companies for inputs increasing, suggesting upside risks to service sector inflation [1] - Services make up 60% of the CPI index, so a higher rise in service sector inflation suggests that overall inflation may be more sticky and elevated [1] - The consensus forecast expects inflation to be 3% for the next 12 months, while the Fed's target is 2%, indicating a potential upside risk to inflation if the economy doesn't slow down [2] - Goods inflation is moving higher partly because of tariffs, and service sector inflation is also showing upward pressure, leading to the conclusion that a pause in rate cuts may be warranted to assess alternative inflation indicators [2] - If inflation stays higher for longer, consumers will face higher prices, impacting real spending, especially for price-sensitive consumers [2] Economic Outlook - The absence of government data on non-farm payrolls and inflation makes it challenging for markets and the Fed to assess the true state of the economy [1] - Economists have been predicting slowdowns that haven't materialized, and the delayed negative effects of the trade war may not arrive, suggesting the economy may not slow down as expected [1] - Alternative data sources to watch in the absence of government data include Redbook same-store retail sales (weekly), OpenTable restaurant data (daily), and Star hotel data (weekly) [1] AI Impact - The AI story now makes up 35% of the S&P 500, with the 10 biggest stocks accounting for almost 40% of the overall S&P, indicating a high concentration [2] - Larger companies are beginning to report a slowdown in their adoption rate of AI, posing a risk to the economic outlook if the AI story starts to fade [3] - There is a very high concentration in the AI story that's driving the stock market forward, which is somewhat disconnected from what's going on in the economic outlook [5]

Investment Strategy in India - India's economic landscape is characterized by tariffs, trade shifts, market volatility, and a slowing economy [1] - Experts advise on investment strategies for 1 million rupees (approximately $11,275) in the Indian market [1]

Economic Outlook - The likelihood of a recession is perceived to be higher than what markets currently anticipate, with signs of a significant economic slowdown evident [1] - There is an increase in defaults across various loan types, particularly in student loans, credit cards, and auto loans, indicating consumer financial stress [1] Consumer Impact - The recent bankruptcy of the seventh largest used car retailer highlights the pressure on consumers, which is expected to persist as tariffs are passed on to them [2] - This situation is described as a "perfect storm" that could potentially lead to a recession [2] Stock Market Dynamics - Despite economic concerns, the stock market is experiencing a strong performance, with a five-month winning streak and entering Q4, which is historically the best quarter [3] - There is a possibility that the stock market has decoupled from the economy, driven by excitement around AI spending, which could continue to support the S&P 500 [3][4] - However, there is also a risk that stocks may begin to anticipate a significant economic downturn, leading to a potential drawdown in Q4 [4]

U.S. Private Sector Shed Most Jobs In Two Years Last Monthhttps://t.co/2tZIqKiTwf https://t.co/idLWw1jyKY ...

Bond Market Reaction & Fed Policy - The long end of the curve is considered cheap based on valuation metrics, but the front end could also move if economic data weakens due to a prolonged shutdown [2] - The market is pricing in gradual Fed cuts to neutral, but a worsening economy (unemployment rate above 45%) could lead to more aggressive Fed action [2] - An independent Fed is responding to data and aiming to reduce the level of restrictiveness, making bonds attractive [6] - The Fed is expected to cut rates to 3%, which is close to neutral, even without a significant slowdown [8] Auction & Demand - End-user demand for Treasury auctions remains strong, indicating structural positives in the US economy [5] - Structural positives in the US economy, such as AI capex and strong corporate fundamentals, are driving demand for US bonds [6] - People look at 55%-6% in high-quality bonds and they like it [6] Investment Strategy & Risk Hedge - The 5 to 10-year part of the curve is considered a sweet spot, offering a balance between yield and duration risk [3][14][15] - Bonds are still considered a hedge, especially with the Fed likely to cut rates more aggressively [12][13] - Investors may diversify into other assets like gold and cryptocurrency, but US Treasuries remain a safe haven [9][10][11][12] - High-yield market can offer yields higher than 5%-6% without taking on that much duration risk [15]

China’s factory activity extended its decline into a sixth month, the longest slump since 2019, as the economy descends into a slowdown after a growth spurt to start the year https://t.co/qPpcWfCUVy ...

RT Bloomberg em Português (@BBGEmPortugues)#BrasiliaemOff #Bastidores Uma das principais queixas do Ministério da Fazenda sobre as altas taxas de juros é que elas estão provocando uma desaceleração da economia que vai se refletir sobre a arrecadação.Por @beckmartha https://t.co/oxV0m93eBO ...