The “King of Bonds” sees the risk of a debt restructuring with global repercussions

IN “THE SUN ALSO RISES”, Ernest Hemingway’s first novel, Mike Campbell, a jaded war veteran and inveterate drunk, is asked how he went bankrupt. “Two ways,” he replies. “Gradually and then suddenly”. America’s government—like Mike, no stranger to serial binges and futile wars—is on its own way to bankruptcy. We have lived through the gradual part. Under the next few presidential administrations, the national debt will mushroom beyond the government’s ability to service it, perhaps even beyond the credulity of the country’s creditors. In the coming years expect dollar debasement, debt restructuring or both.

America’s sovereign-debt spiral has been building since Washington embarked on large budget deficits in the 1980s. As the tab rose from about 30% of GDP towards 100% in the 21st century, the Treasury continued to find willing creditors. The dollar still rules as the world’s reserve currency. Inflation and bond yields tracked lower for decades. And since 2008, under the anaesthetic appellation “quantitative easing”, the Federal Reserve has shown its readiness to print more dollars to monetise away government debt. So why can’t the band play on?

n interplay of forces is going to break the bank. Yields on Treasury bonds fell and fell for nearly 40 years, with the 10-year yield hitting all-time lows in 2020. America has since entered a secular environment of rising interest rates, so the costs of servicing the national debt are rising rapidly. As securities issued at interest rates as low as 0.5% mature, the principal is being rolled into the higher rates of the spot market, at the moment 3.7 percentage points higher. Higher interest expenses feed into deeper deficits, sparking more borrowing, driving heavier debt loads. This is how the debt spiral spirals—unless, that is, lower rates are engineered by the Federal Reserve, which would cause inflation. There will be no road left to kick the can down.

A recession would propel this debt spiral into crisis. The government is running annual deficits approaching $2trn, more than 6% of GDP, even with positive growth and four years of low unemployment. This breaks with the Keynesian bargain which prevailed from the end of the second world war until the middle of the past decade: run large deficits to offset economic weakness, shrink them in times of robust growth. With the deficit at recessionary levels already, the hit to tax revenues in an actual recession would drive America yet further into the red.

As in the past, a recession—or fear of it—should drive investors towards perceived safe havens, including Treasury bonds: a rate-lowering movement that may already have played out. Once confronted with a recessionary decline in tax revenue, the government’s probable reflex would be a return to money-printing. Politicians would borrow more to fund the wider gap, taking for granted debt monetisation by their central bank. The scale of money-printing, however, would dwarf that of past bouts of Fed bond buying. Yields would rise to discount repayment in a depreciated currency.

Let’s run the numbers. Projections to 2034 from the Congressional Budget Office (CBO) assume no recessions, an average primary deficit of 2.6% of GDP, plus 3.6% from debt expense (the latter assuming an effective interest rate on government debt of 3.5%). In the next ten years, under those assumptions, America’s debt-to-GDP ratio would rise from 99% to 122%.

But those assumptions are optimistic. America’s economic expansions after the second world war have lasted an average of 21.8 quarters; the current one has spanned 17. Timing economic cycles is difficult but for the sake of argument, let us accept the CBO’s recession-free outlook. The 2.6% primary-deficit premise, though, is another matter. Since the financial crisis of 2007-2009, it has averaged 4.9%. As for the effective rate, consider 3.5% a rosy view. Rates of 6% are certainly within the experience of the past 30 years; for a world breaking with past inflation norms, 9% is not unimaginable.

In either case our debt-spiral model, assuming nominal growth stays the same, shows this situation compounding into fiscal catastrophe. By 2034 debt service at 6% rates would consume 45% of all tax revenue; at 9% rates it would eat up 83%. The budget deficit would balloon from 6% of GDP to 11% or 18%, respectively. These numbers imply debt-to-GDP ratios of 147-184%. The Penn Wharton Budget Model has shown that debt loads of 175-200% would be sustainable only under the most favourable assumptions, and a belief that Washington will prevent the debt burden from rising further. “Once financial markets believe otherwise,” says the research group, “financial markets can unravel at smaller debt-GDP ratios.”

Something will surely give before such hypothetical nightmares play out. Earlier this year, the CBO itself and the International Monetary Fund issued their own explicit warnings. Phillip Swagel, the head of the CBO, even warned that the “unprecedented” escalation of America’s debt bender risked a kind of market reckoning that curtailed the government of Liz Truss, briefly Britain’s prime minister.

President-elect Donald Trump’s plan for a Department of Government Efficiency (DOGE) led by Elon Musk and Vivek Ramaswamy is the most encouraging sign I have seen of a fiscal awakening in Washington. I doubt DOGE will touch the entitlements, where much of the imbalance lies, but let us hope this begins a trend in the right direction.

When external pressure at last forces America’s leadership into hard choices, I believe the first move will be dollar debasement. Congress may one day impose taxes on assets—ineffective but gratifying to some. And there is the real possibility of a quasi-default by the Treasury, through debt restructuring beyond what today’s consensus would dare to contemplate. In the upheaval to come, few are likely to be spared.

Read the full article HERE.

–The economy is doing “exceptionally well” as President-elect Donald Trump gets ready to enter the White House, said Moody’s Analytics chief economist Mark Zandi.

–But, Zandi added, “I do think there are some potential storms coming.”

The economy is doing “exceptionally well” as President-elect Donald Trump gets ready to enter the White House, according to Moody’s Analytics chief economist Mark Zandi.

Zandi, speaking at the Consumer Federation of America’s financial services conference on Wednesday, noted some of the glowing areas: Gross domestic product has been growing at around 3%, productivity and business formation rates are strong and the stock market is up.

“The economy can weather a lot of storms,” Zandi said.

But, he added, “I do think there are some potential storms coming” next year under the new administration.

Immigration policy, tariffs could affect economy

Zandi expects Trump to act quickly on deporting immigrants and implementing tariffs, two moves that could have profound impacts on the U.S. economy.

“I believe President Trump is going to do what he said he’ll do on the campaign trail,” Zandi said. “He’s going to be quite aggressive in pursuing the policies.”

Immigration has played a big role in the economy’s strength, Zandi said.

Others agree. “Recent immigrants have flowed disproportionately into the parts of the labor force that were particularly tight in 2022, contributing to labor supply in places where it was most badly needed,” Goldman Sachs analysts wrote in a note to clients in May.

Meanwhile, tariffs create “a whole lot of uncertainty for businesses,” Zandi said. As a result, they could lead to job losses.

Tariffs are also likely to impact people’s spending, he said.

“It’s going to mean higher costs for consumers, it’s a tax increase,” Zandi said.

Trump’s universal tariff proposals could cause prices to skyrocket on clothing, toys, furniture, household appliances, footwear and travel goods, according to a recent report from the National Retail Federation.

Trump has said he would impose a 10% or 20% tariff on all imports across the board.

The NRF found that the impact of the tariffs would be “dramatic” double-digit percentage price spikes in nearly all six retail categories that the trade group examined.

For example, the cost of clothing could rise between 12.5% and 20.6%, the analysis found. That means an $80 pair of men’s jeans would instead cost between $90 and $96.

These new prices would squeeze consumer budgets, especially for low-income households that spend triple as much of their monthly budgets on apparel as high-income households spend, according to the Bureau of Labor Statistics.

Read the full article HERE.

Gold could extend its record run into 2025 as further interest rate cuts from major central banks and the prospect of a weaker dollar will boost demand for the safe-haven asset, Heraeus Precious Metals said on Tuesday.

Heraeus expects gold prices to range from $2,450 to $2,950 per ounce in 2025, influenced by continued buying by major central banks, albeit in lesser quantities than in 2024, geopolitical risks in Ukraine and the Middle East.

Gold, often used as a safe store of value during times of political and financial uncertainty, tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding the non-yielding asset.

“If the Chinese government’s economic stimulus measures boost the economy, China and India could provide a solid basis for gold demand in 2025,” the company said in a report.

China’s central bank resumed buying gold for its reserves in November after a six-month pause, official data by the People’s Bank of China (PBOC) showed on Saturday.

“With the return of Donald Trump as US president, there is likely to be more uncertainty regarding trade and tariffs, which should also support the gold price,” said Steffen Metzger and Stefan Staubach, who have been leading the precious metals division of Heraeus.

Gold has surged more than 29% this year and is on track for its best annual performance since 2010, driven by central bank interest rate cuts and growing geopolitical tensions.

Heraeus further noted that industrial demand for silver is expected to surge, propelled by the continued growth in solar photovoltaic demand.

The current gold-silver ratio indicates silver’s undervaluation compared to gold, suggesting that silver may outperform gold in late bull markets, with expected prices between $28 and $40 an ounce, the report said.

The platinum market is projected to remain in a deficit in 2025, the report said. Despite rising demand from the automotive and industrial sectors, Heraeus anticipates that platinum prices will remain within the $850 to $1,220 per ounce range.

However, the report underscores that demand for palladium, which is heavily dependent on the automotive industry, might decline as internal combustion engines lose market share to electric vehicles.

This shift could exert downward pressure on palladium prices, with Heraeus projecting a price range of $800 to $1,200 per ounce.

Read the full article HERE.

A Geopolitical Commentary

Gold has long been considered a crisis hedge and a store of value in the face of global volatility, market uncertainty, and economic distress. As we move toward year-end, a confluence of geopolitical factors has aligned to increase gold’s risk-off appeal creating an ideal buying opportunity for the world’s favorite safe haven.

Geopolitical Futures defines geopolitical risk as.

“… the potential political, economic, military, and social risks that can emerge from a nation’s involvement in international affairs. Typically, they emerge whenever there is a major shift in power, a conflict, or a crisis. These risks can have far-reaching implications for both the country itself and the global community at large. There are many factors that can contribute to geopolitical risks, such as a nation’s economic stability, its political relations with other countries, and its military strength.”

The Russia and Ukraine War

On February 24, 2022, Russia invaded Ukraine in a major escalation of Russia-Ukrainian War which started in 2014. Global aid to Ukraine has now reached a staggering $278 billion. As of the end of September, nearly $183 billion had been appropriated by the United States.[1] Meanwhile, the war has cost Russia about $211 billion[2] along with 200,000 casualties and half a million wounded.[3]

The war has also contributed to global instability and worldwide inflation by disrupting supply chains, damaging agriculture, and destroying infrastructure. According to the International Monetary Fund, the war has specifically undermined efforts to address extreme poverty, food insecurity and environmental degradation.[4]

The war has also resulted in an historic shift in the global energy markets.

“Any American around at the time will likely remember the 1973 oil embargo. That’s when Arab oil producers cut exports to the U.S. and other nations in retaliation for support of Israel during the Yom Kippur War. Gas stations ran dry. Prices skyrocketed. And the U.S. economy flattened. It also created a profound and permanent shift in energy markets as nations looked for new suppliers beyond the Middle East. Now, Russia’s invasion of Ukraine has created another major shift in energy.”[5]

This shift has injected extreme uncertainty into the energy market and increased price volatility. And according to Control Risks, a global risk consultancy, “greater disruption to both oil product and crude oil markets is credible if Ukraine further improves its drone capabilities and Russia fails to boost its air defences.”[6]

The Israel and Hamas Conflict

The U.S. has spent an estimated $23 billion on the Israel-Hamas conflict which started on October 7, 2023 after Hamas attacked Israel killing some 1200 Israelis and taking hostages. $17.9 billion has been to support Israeli military operations.[7] Israel has spent over $26 billion to fund the war against the terrorist group.[8] The cost of the war has caused Israel’s economic output to plummet 5.6%, the worst of any of the 38 countries in the Organization for Economic Cooperation and Development.[9]

The Associated Press reports the following:

Israel-Hamas War Statistics

Internationally, the war has resulted in economic disruption, political realignment, new military vulnerabilities and a host of strategic challenges for the region reminiscent of the painful challenges of the past with Iraq and Afghanistan.[11]

And according to the Congressional Research service, the humanitarian toll has been simply staggering:

“About 90% of Gaza’s some 2.1 million residents have been displaced, with most facing unsanitary, overcrowded conditions alongside acute shortages of food, water, medical care, and other essential supplies and services. Obstacles to transporting aid through crossings and Israeli checkpoints and then safely delivering it have contributed to high levels of food insecurity.”

South Korean Martial Law

On December 3, 2024, the president of South Korea, Yoon Suk Yeol, declared martial law citing a threat from “anti-state” forces. It was the first time martial law had been declared in the East Asian country in over 40 years when a coup was carried out after the assassination of President Park Chung-hee back in 1979.[12]

The move plunged the nation of almost 52 million people into a national crisis. The martial law declaration by President Yoon was met with fierce backlash, condemnation and calls for reversal. Yoon did reverse the edict after just six-hours but then faced immediate calls for impeachment. While the vote for his removal from office failed, South Korean authorities have opened an investigation and are weighing possible insurrection charges against Yoon. According to CNN World, the president’s future is precarious at best

“While Yoon survived an impeachment vote in an opposition-led parliament on Saturday, his political survival now hangs in tatters. The travel ban on the country’s embattled leader was confirmed by the Corruption Investigation Office on Monday. His party previously said they will seek Yoon’s resignation and urged the president to be suspended from duties to protect the country from ‘grave danger.’”

The crisis has caused stocks on the Kospi (The Korea Composite Stock Price Index) and the South Korean won to collapse to levels not seen since 2009. As officials in Seoul are working frantically to prevent a market meltdown, the country is confronting deep political uncertainty and a period of prolonged volatility.

South Korea’s sudden instability threaten global tech supply chains, particularly for critical technology exports.

“As a major producer of memory chips, displays, and other critical tech components, South Korea plays an essential role in global supply chains for products ranging from smartphones to data centers …  South Korea’s semiconductor ecosystem, driven by industry leaders like Samsung and SK Hynix, is a cornerstone of global technology supply chains. Its dominance in critical areas like memory chips makes it indispensable to industries worldwide.”[13]

The Toppling of the Syrian Government

After ruling Syria for 50 years, the Assad regime was toppled on December 8, 2024. After just two weeks of fighting, rebels converged on Damascus and seized control of the capital virtually unopposed — as Syrian leader Bashar al-Assad fled to Moscow. 

The Assad Regime Ended on December 8, 2024

“Three decades after his rise to prominence and almost a quarter century of rule, Bashar is gone and so is the Assad dynasty. Almost incomprehensively swept away over a two-week period during which the Islamist rebel group Ha’yat Tahrir al-Sham (HTS) and its partner, the Turkish-backed Syrian National Army (SNA), swept out of Idlib province to seize the country from Bashar who barely managed to put up a fight after his Russian and Iranian allies abandoned him.”[14]

But the sudden, collapse of the Assad regime raises fears of a power vacuum in Syria and the possibility that the country could fall into the hands of terror groups. Indeed, Abu Mohammed al-Golani, the leader of the largest of the rebel factions is a former al-Qaeda commander.

According to The Hill:

“al-Golani is promoting himself as a pragmatic, political leader and extending assurances for Syria’s multiethnic and religious populations. These promises run in direct contrast to the violence and human rights abuses carried out by the Islamist groups he aligned with in the past, such as ISIS and al Qaeda.”[15]

The collapse of the Syrian government has thrust the Middle East into even greater uncertainty. While Bashar al-Assad was a notoriously brutal dictator, the rapid collapse of his regime has left little time to for the country to chart a path forward. Syria’s economy contracted by 85% during its civil war, (which started back in March of 2011) and most of the country’s infrastructure has been destroyed. Inflation in Syria is in the triple digits and their economic recovery will require significant and ongoing support from the rest of the world.[16]

With war still raging in Europe, ongoing conflicts in the Middle East, and a new leadership crisis in South Korea and Syria — the world order seems to be fraying before our very eyes.

Gold is a Global Crisis Hedge

Gold thrives in a chaotic world as prices have historically increased during times of pronounced global uncertainty. As the world economy becomes increasingly more fragile, physical gold will become increasingly more attractive and look for prices to rise on unprecedented safe haven demand.

Thor Metals Group, was voted the “Best Overall Gold IRA Company” of 2024. For more information on acquiring gold or any other investment grade metal, call 1-844-944-THOR to speak to a precious metals expert.

[1] https://www.ukraineoversight.gov/Funding/

[2] https://www.defensenews.com/pentagon/2024/02/16/ukraine-war-has-cost-russia-up-to-211-billion-pentagon-says/

[3] https://www.economist.com/briefing/2024/11/28/the-war-in-ukraine-is-straining-russias-economy-and-society

[4] https://www.imf.org/en/Publications/fandd/issues/2022/03/the-long-lasting-economic-shock-of-war

[5] https://www.npr.org/2023/02/28/1160157753/how-russias-war-in-ukraine-is-changing-the-worlds-oil-markets

[6] https://www.controlrisks.com/our-thinking/insights/ukraine-war-remains-potential-disruption-to-energy-markets

[7] https://watson.brown.edu/costsofwar/papers/2024/USspendingIsrael

[8] https://www.timesofisrael.com/a-year-of-war-saps-israels-borrowing-strength-while-costs-balloon/

[9] https://apnews.com/article/israel-hamas-hezbollah-war-cost-military-spending-32a53a86d946418022ca636539a83f4f

[10] https://apnews.com/article/israel-palestinians-hamas-war-anniversary-statistics-e61765035c725b3c8d4840e2bab565cd

[11] https://www.wilsoncenter.org/article/five-global-dangers-gaza-war

[12] https://www.csis.org/analysis/yoon-declares-martial-law-south-korea

[13] https://www.cio.com/article/3617847/south-koreas-political-unrest-threatens-the-stability-of-global-tech-supply-chains.html

[14] https://www.cfr.org/expert-brief/after-fall-assad-dynasty-syrias-risky-new-moment

[15] https://thehill.com/policy/international/5030921-who-is-abu-mohammed-al-golani-leader-syrian-rebels-who-toppled-assad/

[16] https://www.dw.com/en/syria-after-assad-whats-next-for-the-devastated-economy/a-71003751

Gold rose after China’s central bank added bullion to its reserves for the first time in seven months, and the collapse of Syria’s ruling dynasty further destabilized the Middle East.

Bullion climbed as much as 1%, after the People’s Bank of China said Saturday it bought 160,000 fine troy ounces last month. That was the first addition since April, which was the end of an 18-month run of purchases that had helped underpin prices.

The resumption of buying shows the PBOC is still keen to diversify its reserves and guard against currency depreciation, even with bullion near record high levels. Still, the volume it bought — about five tons — was relatively small compared with monthly additions earlier this year.

Market watchers also tend to be skeptical about the accuracy of declared Chinese central bank gold purchases.

“I take the Chinese six-month ‘pause’ with a pinch of salt,” said Rhona O’Connell, head of market analysis EMEA & Asia at StoneX Group Inc. “It is public knowledge that the PBOC has a history of reporting no purchases and then declaring a massive quantum leap in recorded holdings.”

Traders were also monitoring developments in Syria, after President Bashar al-Assad fled as rebel troops captured the capital Damascus. US airstrikes hit dozens of Islamic State targets in the central part of the country on Sunday as President Joe Biden cautioned that Assad’s downfall could lead to a resurgence of Islamic extremism.

“The government’s collapse in Syria could see haven demand flowing in,” according to ANZ Group Holdings Ltd. “The latest November nonfarm payroll confirms that rebalancing continued in the US, which will continue to support the Fed’s easing bias.”

Markets are focusing on the US consumer and producer-price reports due later this week, which are expected to show little increase in inflation pressures. The figures are among the last key indicators before the Federal Reserve’s meeting next week — its final policy decision before Donald Trump takes office in January. Treasury yields have drifted down as traders boosted wagers on another rate cut — a scenario that tends to benefit gold as it does not pay interest.

Gold soared to an all-time high above $2,790 an ounce in October, supported by the Fed’s pivot to monetary easing, as well as increasing haven demand on heightened tensions in the Middle East and Ukraine. Prices have eased since then, but remain 29% higher this year.

Spot gold rose 0.9% to $2,656.72 an ounce as of 12:19 p.m. in London, following a 0.4% decline last week. The Bloomberg Dollar Spot Index was steady, while silver, platinum and palladium all posted strong gains.

Read full article HERE.

Wealthy individuals want assets that protect from ‘market storms’ in 2025

While global stock markets have been on a pretty good run over the past decade, the billionaires have apparently got them beat.

That’s according to the 10th annual “Billionaire Ambitions Report” for 2024, recently published by UBS. At the top of that report was data showing that between 2015 and 2024, total billionaire wealth rose by 121% globally, from $6.3 trillion to $14 trillion. The bank compared that to the MSCI AC World Index, which posted a 73% gain in the same time frame. The S&P 500 incidentally, has gained about 77% in the same period.

Here’s their chart:

As for how those billionaires plan to hang onto that wealth, the UBS research finds those asset-class views shifting as U.S. and eurozone central banks lower interest rates.

Over the next year, 43% of billionaires said they would boost exposure to real estate and 42% to developed market equities. But they’re also looking to increase investments in “perceived havens from market storms,” with 40% signaling intentions to boost gold and precious metals exposure, and 31% cash levels.

Wealthy individuals remain keen on alternative investments, with 38% planning to boost direct private equity holdings, though 28% plan to raise private-equity funds/funds of funds holdings and 34% want to decrease them. Some 26% plan to boost infrastructure investments, and 35% private debt. But 27% of billionaires surveyed citing plans to decrease hedge-fund investments against 23% wanting to increase that segment.

Also nearly a third, or 32%, want to invest more in art and antiques, a notable boost from 11% last year.

Many billionaires see the best opportunities in North America, with 80% preferring that region over the next 12 months, and 68% over the next five years, as they cite technological innovations as well as energy security amid global instability. Just 11% see more opportunity in China.

North American billionaire wealth, incidentally jumped 52.7% to $3.8 trillion between 2015 and 2020, and another 58.5% between 2020 and 2024, led by industrials and tech billionaires, to $6.1 trillion, UBS said. The region also hosts the greatest percentage of the top 100 billionaires — 43%, versus 21% in Western Europe, 15% in Southeast Asia and 8% in China.

Tech billionaires wealth across the globe, not surprisingly, saw their wealth grow the fastest of any sector, from $788.9 billion in 2015 to $2.4 trillion in 2024, UBS said.

The overall number of billionaires grew from 1,757 to 2,682 between 2015 and 2024, with the peak hit in 2021 with 2,686 billionaires, but since that time growth has remained flat.

Finally, UBS notes that over 10 years, multigenerational billionaires have inherited a total of $1.3 trillion. “Naturally, this amount understates the total inheritance as many heirs have not themselves become billionaires,” they said.

“Looking forward, we calculate that billionaires aged 70 or more will transfer $6.3 trillion over the next 15 years, mainly to families but also chosen causes,” and that’s well over 2023’s estimate of $5.2 trillion over 20 – 30 years, due to asset price inflation and billionaires aging, the report said.

Read the full article HERE.

Federal Reserve Chair Jerome Powell warned Wednesday that the U.S. is on an “unsustainable” fiscal path and called for a course correction days after the national debt topped $36 trillion for the first time ever.

“The U.S. federal budget is on an unsustainable path. The debt is not at an unsustainable level, but the path is unsustainable, and we know that we have to change that,” Powell said during an interview at the New York Times DealBook Summit.

Powell, a lifelong Republican first appointed lead the central bank by President-elect Trump and reappointed by President Biden, has repeatedly warned the U.S. is on an unsustainable fiscal path. 

His latest comments come as Republicans ready for an intraparty battle over the potential fiscal impact of massive tax cuts in Congress, which is responsible for setting fiscal policy.

Speaker Mike Johnson (R-La.) and GOP leadership want to move quickly to craft a follow-up to the 2017 Tax Cuts and Jobs Act (TCJA) once Trump takes office and the GOP consolidates control in Washington.

Many provisions in Trump’s signature tax bill are set to expire in 2026, including individual tax rate cuts, a state and local tax (SALT) deduction cap and business tax breaks.

But a small coalition of budget hawks, which last year ousted former Speaker Kevin McCarthy (R-Calif.) over federal spending, will wield enormous power given a slim majority in the House. 

Their influence could derail plans to use budget reconciliation to fast-track a tax reform bill as Republicans grapple with how to deliver Trump’s tax cuts without further accelerating the national debt, which has alarmed lawmakers on both sides of the aisle.

“We don’t need to pay the debt down. We don’t need to balance the budget. We just need the economy to grow faster than the debt. And that’s not happening,” Powell said. 

“We’re running very large budget deficits at a time of full employment and strong growth, so we need to address that, and we’ve got to do it sooner or later — and sooner is better than later,” he added.

Read full article HERE.

Private-sector hiring continues to slow, but workers are finding pay increases for remaining in their current positions.

The U.S. economy saw softening private-sector job creation last month, adding to evidence of a slowing labor market heading into December that could boost the case for a final Federal Reserve rate cut.

Payroll-processing group ADP said Wednesday around 146,000 jobs were created in the private sector last month, a decrease from the downwardly revised tally of 188,000 in October.

Economists had expected ADP’s National Employment Report to show gains of around 166,000 as hiring slowed into the middle of the fourth quarter.

Investors are also likely to focus on wage and earnings details provided in the ADP release, which showed a year-on-year increase of 4.8% for so-called job stayers. That’s the first increase in more than two years for those workers who remained in their positions. 

Those seeking new roles saw pay gains of 7.2%, the lowest wage premium for changing jobs in more than three years.

“While overall growth for the month was healthy, industry performance was mixed,” said ADP’s chief economist, Nela Richardson. “Manufacturing was the weakest we’ve seen since spring. Financial services and leisure and hospitality were also soft.” 

Earlier this week, data from the Bureau of Labor Statistics showed that October job openings rose to around 7.7 million position while the so-called quits rate edged higher, to 2.1%. The report suggested workers are still finding higher-paying roles even amid a broader slowdown in hiring.

Stock futures added to gains in the wake of the ADP release, with the S&P 500 called 18 points higher and the Nasdaq set for a 150-point advance at the start of trading. The Dow is priced for a 165-point gain.

Benchmark 10-year Treasury note yields held steady at 4.271% following the release, while 2-year notes were last pegged at 4.2% following their biggest two-day pullback of the year.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.2% higher 106.58.

Read the full article HERE.

The threat of a tax on imports will be his all-purpose lever in foreign and even domestic policy.

Well, here we go. Donald Trump is still two months from returning to the White House, but he’s already wielding tariffs as an all-purpose bludgeon to achieve his political and foreign-policy goals. Markets will have to get used to it because this is going to be Mr. Trump’s second-term method, no matter the economic and strategic ructions.

The President-elect issued a broadside Monday on Truth Social vowing 25% tariffs against all goods from Mexico and Canada, and a new 10% tariff on imports from China. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” he wrote about the Canada and Mexico levies.

The first political point to note is that Mr. Trump’s tariff justification isn’t economic or based on the traditional claims about cheating or “dumping” products in the U.S. That would typically require studies that find economic harm or a national-security threat.

The tariff here is in service of Trump’s campaign promise to reduce illegal migration and fentanyl smuggling. He vows to take unilateral executive action without any explicit legal rationale. Mr. Trump is threatening the countries, including two neighbors and allies, with economic harm if they don’t help him solve a domestic U.S. problem.

This is an extraordinary use of tariffs, but Mr. Trump is going to use this threat often in his second term. He tried a version of this in his first term to coerce Mexico into assisting him in better policing the border, and he liked the result. Mexico went along with the Remain in Mexico program that held migrants on the Mexican side of the Rio Grande while they awaited asylum rulings.

The hopeful interpretation now is that Mr. Trump is merely using tariffs again as a negotiating strategy to get these countries to help. If they act to reduce the flow of drugs and people, he’ll lift the tariff threat and claim political victory at home.

The problem is that this strategy isn’t cost free and there can be collateral damage. Start with the U.S. auto industry, which depends on cross-border trade to remain competitive. Vehicle components and raw materials move back and forth across North American borders as cars are assembled. A 25% tariff on each border pass would raise prices and cost American jobs. It’s no accident that shares of Ford Motor (-2.6%) and General Motors (-9%) fell sharply on Tuesday on the tariff news. Mr. Trump may not care about stock prices, but what about his new working-class coalition?

There is also the potential risk of retaliation. Mexican President Claudia Sheinbaum on Tuesday offered to talk to Mr. Trump about fentanyl and migration. But she also said she is prepared to respond with tariffs on U.S. exports. Mexico has shown in the past that it can be politically shrewd choosing the American goods and areas it targets with tariffs. Think swing Congressional districts and states.

“One tariff would be followed by another in response, and so on until we put at risk common businesses,” Ms. Sheinbaum said. She has her own economic nationalists to please.

There’s also the not-so-small matter that Mr. Trump’s tariffs, if imposed, would shatter the U.S.-Mexico-Canada Agreement that he negotiated and signed in his first term. The pact’s terms say it can’t be reviewed until 2026, and then the parties have another decade to negotiate new terms or abandon it.

In 2019 Mr. Trump said the USMCA would be “the best and most important trade deal ever made by the USA.” If he blows it up based on his own short-term political needs, he’ll send a message around the world that his—and America’s—treaty word can’t be trusted. U.S. trading partners and allies everywhere will get the message, and China will be courting them with promises of a more reliable export market. Using trade to punish allies is especially short-sighted if you want their help against Chinese mercantilism.

It’s also possible that Mr. Trump views tariffs not merely as a tool for ad hoc negotiation but as a lever to remake the entire global trading system. In that case he’ll try to build high tariff walls in an attempt to force U.S. and foreign companies to build nearly everything in America. The economic and political harm from that strategy is for another day, but investors can’t rule it out and members of Congress would be wise not to give him that power.

As we wrote during the campaign, tariffs were the main economic risk of his candidacy. Mr. Trump campaigned as the Tariff Man, and he aims to impose them early and often. Get ready for what could be a wild ride.

Read the full article HERE.

Key Takeaways

Retirement savings are crucial for a secure future, but Americans in their 50s face unprecedented challenges. They’ll need to overcome these issues to experience a comfortable retirement, but it’s important to understand the most significant burdens.

Here are five key roadblocks Americans in their 50s will need to overcome in order to build a secure future.

1. Shifts in retirement planning

One of the biggest challenges near-retirees face in the U.S. today is shortfalls in retirement savings accounts that result from getting caught in a transformational period.

Defined benefit pension plans were once the norm when it came to retirement savings. Workers did their jobs and employers offered a pension that provided a guaranteed lifetime income in retirement, with the amount paid dependent on things like salary and years of service.

In 1978, however, 401(k) deferred compensation plans were introduced, and a seismic shift occurred. Employers began moving toward defined contribution plans that required workers to decide how much and where to invest funds. This pension alternative became increasingly popular over time and is now standard practice in the private sector.

Americans in their 50s were among the first given the complex task of investing enough to support themselves in their later years. Many were unprepared to take on this obligation, potentially leading to shortfalls in retirement savings accounts.

To overcome this, workers must invest wisely. Those in their 50s should get as close as possible to maxing out their 401(k), including taking advantage of catch-up contributions available for those 50 and over. Build a budget around this goal and automate the process to maximize your chances of success.

2. Lifestyle inflation

Lifestyle inflation is another issue. This can occur when you increase your spending and living standards as your income increases. For example, while you might have once been happy with an older used car or a smaller home, you’re now eyeing that sprawling property or BMW after getting a big raise.

While there’s nothing inherently wrong with upgrading your standard of living slowly over time, it can become a problem if you aren’t living within your means or don’t prioritize saving for the future over consumption.

Unfortunately, many Americans may not be capable of exercising this level of discipline. Bank of America data shows that the proportion of people living paycheck-to-paycheck increases with age.

One way to help curb this problem is to bank at least a portion of your raises or bonuses. If you’re comfortable living your current lifestyle, any salary increases can go toward savings rather than spending more.

3. Student loan debt

While student loans are often considered a young person’s issue, that’s not necessarily the case. In fact, according to Pew Research Center, 14% of adults ages 40 to 49 still have student debt, as do 7% of people between 50 and 59, from their own education.

Some Americans in their 50s might also have student loans taken out on behalf of their kids. While this certainly may have a positive impact on a child’s future prospects, burdening yourself with student debt at this age can also place your retirement security at risk.

Those who still carry student debt may want to check out different repayment plans and possibly assistance programs offered through employers. Parents thinking about taking on debt for their kids need to review their finances closely to ensure it’s affordable, or explore alternative ways to secure funding.

4. High housing costs

Home prices, along with mortgage rates, remain elevated. The median sale price of a house sold in the U.S. in the third quarter of 2024 was $420,400, according to the Federal Reserve Bank of St. Louis. As of Nov. 27, 30-year fixed-rate mortgages averaged 6.81%, per Freddie Mac.

Furthermore, those who purchased a home when mortgage rates plummeted during the pandemic may find themselves trapped by their low-rate loan and unable to afford to move because of present-day home prices and borrowing costs.

Those struggling with housing expenses may want to carefully consider their options. Downsizing could make sense if you can use your home equity to buy a smaller home with cash and avoid today’s high rates. Looking into non-traditional homes, such as multi-generational living arrangements, could also be a viable solution for some families as many young people are also struggling to buy.

5. Supporting adult kids

Finally, supporting adult kids can be a significant roadblock to saving for retirement, and it’s a common one. In fact, a Savings.com study found 47% of parents with grown kids provide them with some kind of financial support (not including adult children with disabilities). On average, these parents fork over twice as much to support their kids as the average working parent contributed to their own retirement account. This can be a serious drain on resources.

Overcoming this obstacle can mean tough conversations between parents and children. Parents can still help by offering non-financial assistance, such as tips on budgeting, or both sides can work together on developing a roadmap to financial independence.

Fortunately, all of these common roadblocks can be overcome. Start planning today to help yourself retire in time and with the money you need.

Read the full story HERE.