Core Viewpoint - The recent New York Federal Reserve paper suggests that U.S. companies and consumers bear most of the tariff burden, which has been criticized by White House economic advisor Kevin Hassett as flawed and partisan [1][2]. Group 1: Criticism of the New York Fed Paper - Hassett described the paper as "an embarrassment" and the "worst paper" in the history of the Federal Reserve, arguing that its conclusions are based on inadequate analysis [2]. - He emphasized that the researchers failed to consider the broader economic impacts of tariffs, such as the positive effects on wages and benefits from increased domestic production [1][2]. Group 2: Findings of the New York Fed Paper - The paper indicated that approximately 90% of the additional costs from tariffs were passed on to consumers and companies, although the impact diminished over time [3]. - Hassett countered this by asserting that tariffs had minimal effect on prices and contributed to an improved standard of living [3]. Group 3: Economic Indicators - Hassett noted that inflation has decreased over time, with the consumer price index rising only 2.4% year-over-year in January, and core CPI showing its lowest annual gain since March 2021 at 2.5% [4]. - He highlighted that real wages increased by an average of $1,400 last year, suggesting that consumers benefited from the tariffs [4].

Group 1 - The Federal Reserve cut its key interest rate by 25 basis points, placing the overnight borrowing rate in the 3.5%-3.75% range [1] - Experts believe that mortgage rates are influenced by various factors beyond interest rate decisions, including tariffs, inflation, and stagnant wages [2] - The Mortgage Bankers Association reported a 3.8% decline in total mortgage application volume for the week ending December 12 compared to the previous week [4] Group 2 - Financial experts predict that mortgage rates will not change significantly in 2026, with minimal rate cuts expected [5] - The recent Fed meeting saw a non-unanimous vote, indicating a lack of alignment among board members regarding interest rate decisions [5] - As of December 19, the average interest rate for a 30-year fixed-rate conventional loan was 6.208%, reflecting a slight decrease of 0.04% from the previous week [5]

Group 1 - The average U.S. household is projected to incur a cost of $1,300 due to tariffs by 2026, marking the highest effective tariff rate since 1946 [1][2] - Trump's tariffs represent the largest U.S. tax increase as a percentage of GDP since 1993, with an estimated GDP reduction of 0.5% over the next decade if tariffs remain in place [2][4] - Companies face a dilemma of either raising prices, risking reduced revenue, or absorbing tariff costs, which could lead to squeezed profit margins and negatively impact share prices [5] Group 2 - The stock market may experience different impacts from tariffs in 2026 compared to 2025, as companies have depleted their inventory stockpiles that were built in anticipation of tariffs [4] - Historical evidence suggests that tariffs act as taxes that increase prices and reduce the availability of goods and services, leading to lower income and employment [4] - The "TACO trade" concept indicates that significant stock declines due to tariff concerns may present buying opportunities, as the president has historically backed off aggressive tariff threats [6]

Core Points - The first $36 billion in Japanese-funded infrastructure and industrial projects has been approved, marking the launch of a $550 billion investment pact [1][2] - This initiative aims to revitalize the American industrial base and is seen as a mutual benefit for both Japan and the United States [2][3] - The investment committee, chaired by Lutnick, will recommend projects while Japan will provide feasibility input, with a profit-sharing structure favoring the U.S. [5] Strategic Insights - The announcement reflects a multi-year commitment from Japan to enhance economic security for both nations [2][3] - President Trump attributes the capital inflow to his administration's trade policy, particularly the use of tariffs [4] - The agreement allows the U.S. to retain 90% of generated cash flows after initial costs are recovered, indicating a favorable financial structure for the U.S. [5]

Core Viewpoint - The S&P 500's high valuation poses a risk of significant stock price declines, particularly if tariffs negatively impact economic growth [1][2] Group 1: Tariffs and Economic Impact - President Trump's tariffs have increased the average tax on U.S. imports to approximately 13%, the highest level in 90 years [4] - Studies indicate that U.S. companies and consumers are primarily bearing the costs of tariffs, with estimates suggesting they paid 94% to 96% of the tariff burden [6] - The Congressional Budget Office (CBO) predicts that tariffs will lead to lower real GDP, negatively affecting corporate earnings and stock valuations [8] Group 2: Stock Market Valuation - The S&P 500's forward price-to-earnings (PE) ratio was reported at 22.2, significantly above the 10-year average of 18.8, indicating an elevated valuation [9] - Historical comparisons show that similar high valuations occurred during the dot-com bubble and the Covid-19 pandemic, both of which resulted in substantial market declines [9] - If forward earnings estimates are overestimated due to tariffs, a sharp decline or crash in the stock market could occur [10]

Investment Plans - Japan plans to invest approximately $36 billion in US oil, gas, and critical mineral projects as part of a trade deal with the US [1][3] - The first wave of investments includes a power plant in Portsmouth, Ohio, which is touted as the largest natural gas-fired generating facility in US history, generating 9.2 gigawatts of electricity annually [4] Strategic Importance - The investments aim to strengthen Japan's economic ties with the US amid ongoing tensions with China over Taiwan, enhancing both countries' economic security [2][6] - The projects are part of a larger commitment of $550 billion from Japan under the trade deal, which also includes a reduction in US tariffs on Japanese exports [3] Specific Projects - The investment includes a deepwater crude oil export facility off the Texas coast and a synthetic industrial diamond manufacturing site in Georgia, valued at about $600 million [3][5] - The industrial diamond project is intended to ensure domestic production of critical materials for advanced manufacturing and semiconductors, reducing reliance on foreign sources [5][8] Economic Context - Japan's exports rose nearly 17% in January, partly due to increased exports to China, despite existing tensions [9] - The trade deal and associated investments are seen as a strategic move to enhance US energy dominance and industrial capacity while providing returns to Japan [9]

Despite tariffs, deficits, and lingering inflation risks, investors are piling into Treasuries—pushing yields to their lowest levels of the year. ...

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Core Insights - Michael Gray has extensive experience in capital markets and fixed income asset management, having founded Gray Capital Management LLC and previously served as Head of Taxable Fixed Income at Fidelity Investments [1] Group 1 - Michael Gray holds an MBA in Finance from Wharton and a BA in Economics from Union College, indicating a strong educational background in finance and economics [1]

Core Viewpoint - Pinterest's stock has dropped over 40% this year following its fourth-quarter results, which were largely in line with expectations, and cautious guidance for the upcoming quarter [1] Financial Performance - For Q4, Pinterest's revenue increased by 14% year over year to $1.32 billion, aligning closely with the consensus estimate of $1.33 billion [3] - U.S. and Canadian revenue rose by 9% to $979 million, European revenue increased by 25% to $245 million, and revenue from the "rest of world" segment surged 64% to $96 million [3] - Adjusted EBITDA grew by 15% year over year to $541.5 million, while adjusted EPS climbed by 30% to $0.67, slightly below the consensus of $0.69 [6] User Metrics - Monthly active users (MAUs) grew by 12% to 619 million, with a 16% increase in "rest of world" users to 356 million and a 9% increase in European users to 158 million; U.S. and Canadian MAUs grew by 4% to 105 million [4] Revenue Per User - Global average revenue per user (ARPU) increased by 2% year over year to $2.16, with European ARPU rising by 15% to $1.59 and "rest of world" ARPU soaring 42% to $0.27; U.S. and Canadian ARPU increased by 4% to $9.41 [5] Future Guidance - For Q1, Pinterest projects revenue between $951 million and $971 million, indicating 11% to 14% year-over-year growth, with a 3% currency impact expected to slow organic growth; adjusted EBITDA is anticipated to be between $166 million and $186 million [7]