Six-Chart Sunday – Headwinds

6 Infographics + 1 Video (I spoke with Mauldin Economics' Ed D'Agostino)

Last week we offered six reasons for economic optimism, noting positive “tailwinds” too-readily dismissed by the doomsayers (e.g. capX super-cycle growing, deregulation accelerating, oil prices falling, Fed cutting rates, productivity picking up). Many of you appreciated the contrarian hopefulness. This week we’re running with the herd and looking at risks.

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Upcoming live discussion on the future of U.S.-China relations - Join us (no cost)

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1. Layoffs are rising

“Excluding that first year of the Covid-19 pandemic, U.S. job cuts in the first nine months have already surpassed full-year layoffs for every year since 2009… Those in the government sector have been affected the most, with almost 300,000 job cuts announced this year.” Last month’s job cuts — not included in the chart below — were the highest for an October in 22 years.

2. You might not afford your first home until you’re 40

“The typical first-time home buyer in the U.S. is now 40 years old, a record high, as affordability struggles price many younger families out of the market.” (Realtor.com)

3. Renting is also quite expensive right now

“The average monthly mortgage payment as a share of potential home buyers’ income has risen from below 20% prior to the pandemic to a historically high ratio of over 30% since 2022. Affordability is less of a problem in the rental market, but still, the rent-to-income ratio of today is at its highest level since 1980.” (Goldman Sachs)

4. Rising insurance costs make homes that much more unaffordable

“A new Zillow analysis reveals that since 2019, home insurance premiums have grown 38% nationally, while the median homeowner income has grown only 22%. Insurance premiums are growing at the fastest rate in places with relatively higher climate risk.” (Zillow) Home insurance inflation grew faster than health insurance inflation over the same period.

5. Pick Your Poison: Inflation or interest

Monetary policy can make borrowing cheaper (which traditionally drives up inflation) or tame inflation (which increases interest costs for debt). Right now we face rising borrowing costs AND rising inflation. Re inflation: “55% of items in the CPI basket are growing faster than 3%, see chart below. This is the reason why it is difficult for the Fed to cut interest rates in December.” (Apollo)

Re borrowing costs: National interest expenses continue to skyrocket:

6. Central banks may be losing their power to fix things

Regardless of whether they aim for higher inflation or higher interest payments, “the Fed is slowly losing control of the narrative. They lost it when they allowed inflation to get out of control and the market started asking for extra term premium. Inflation is not under control and that extra term premium is still there.” (John Mauldin)

SO WHAT? I prefer tailwinds to headwinds! But businesses, investors & government leaders need to prepare for a volatile, unpredictable, risky future. One of the biggest unknowns out there is U.S.-China relations. Will things improve in 2026 or get more challenging? I discuss live tomorrow (3pm ET) with one of the world’s top experts,Professor Hal Brands. Join us!

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VIDEO

The team at Mauldin Economics does great work, consistently sharing interesting takes by leading analysts that help me expand my media diet beyond the DC Beltway group-think. Ed D’Agostino is a David Rubenstein-level interviewer, and it was fun to be his guest this week.