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Illustration: Aïda Amer/Axios
When Fed chair Jerome Powell said Tuesday that the Fed would "act as appropriate to sustain the expansion" traders took it as the latest confirmation of the Powell put — the notion that Powell and the Fed are prepared to lower interest rates and stimulate the economy if stock prices fall too far.
In a strong economy like we've got now a few interest rate cuts are likely enough to keep confidence high and business activity chugging. But Friday's jobs numbers, coupled with last week's PMI readings show that things may be starting to turn.
This could be a problem that 50 basis points of interest rate cuts (or even 75) isn't going to solve.
What they're saying: "The market overestimates the power of central banks and stimulus," Zhiwei Ren, managing director and portfolio manager at Penn Mutual, told Axios in March.
The problem with the economy today isn't on the supply side, Ren said. The market isn't lacking liquidity and businesses broadly aren't having trouble obtaining credit — those are the issues monetary policy is designed to tackle. The problem today is on the demand side.
On the positive side: The U.S. has at least built in some breathing room by raising rates from zero, beginning in 2015, and reducing the value of the Fed's bond holdings from a record $4.5 trillion.
But, but, but: The Fed continues to purchase trillions in U.S. Treasuries and mortgage-backed securities.
The bottom line: We're in year 11 of the monetary easing experiment and it's become pretty clear the goal of weaning the economy off its free money medicine isn't working as planned.
Our bonus thought bubble, from Axios' business managing editor Jennifer Kingson: "It's interesting that the markets all move with Pavlovian predictability in response to these various indicators, when there's no longer such strong evidence that cause leads to effect the way it once did, or, at least, the way it was once seen to have done. And the power of the levers Powell wields would seem to be quite depleted."
Even as foreign governments like China have reduced their holdings of U.S. Treasuries recently, appetite has continued to push prices up and yields down, with the benchmark 10-year note yielding its lowest since 2017.
One major theme boosting U.S. bond buying has been that Treasuries hold significantly higher yields than comparable government bonds from developed market peers like Canada, Japan and the eurozone. While the U.S. remains the best house in a bad neighborhood, that yield premium is compressing.
What's happening: The differential between U.S. and German yields reached its highest level in modern history in November, but has fallen precipitously since then, notes Bannockburn Global Forex chief market strategist Marc Chandler. Against other countries, yield differentials that were extraordinary have been whittled down from all-time or decade-long highs to cycle lows.
Why it matters: Market strategists are betting the bond market has further room to run, with rates continuing to fall, but if the U.S. yield premium vanishes, foreign buyers could do so as well.
FedEx announced it would not renew its contract to provide express shipping service for Amazon in the U.S., passing up on $850 million in annual revenue.
Why you'll hear about this again: As Amazon muscles into FedEx's turf on shipping — with its online trucking platform already undercutting the the industry's big players' average shipping rates by up to 33%, according to FreightWaves — the shipping giant sent a signal that it was getting behind Amazon's biggest rivals.
Shots fired: "FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space, including brands such as Target, Walgreens and Walmart," a FedEx spokeswoman said in a statement Friday.
A recent report from the Georgetown Center on Education and the Workforce (CEW) finds that there is a correct answer to the often posed hypothetical of being born with a big brain or a big bank account.
In "Born to Win, Schooled to Lose," researchers found that being born "affluent" but dim carries a 7 in 10 chance of reaching a high socioeconomic status as an adult, while being born intelligent but "disadvantaged" means just a 3-in-10 shot.
Details: "The study found that a kindergarten student from the bottom 25% of socioeconomic status with test scores from the top 25% of students has a 31% chance of earning a college education and working a job that pays at least $35,000 by the time they are 25, and at least $45,000 by the time they are 35," CNBC's Abigail Hess reports.
How they did it: Researchers analyzed data from the National Center for Education Statistics (NCES), tracing students from kindergarten to adulthood, assessing how they did on standardized math tests.
TD Ameritrade found that younger generations have a very different outlook on how much an engagement ring should cost than their parents.
Perhaps most surprisingly (to those of you with outdated gender biases, at least), women consistently reported lower expectations of engagement ring costs than men.