What prediction data tells us about the next Fed chairman and US president

See what our charts show. Plus global business indicators and housing market data.

By 
Julius Probst, PhD
 on 
November 12, 2021

This week, we start with Germany, where we can show a clear correlation between the Ifo Business Survey and real GDP growth. The business climate has deteriorated again in recent months amidst another surge of Covid-19 cases. There are good reasons to believe that the German economy will grow at a much slower pace in the coming two quarters than what was expected just a few months ago.

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Consumer sentiment is even weaker in the US, with the Michigan University Consumer Survey falling at a record pace. Economist Danny Blanchflower has observed that such strong declines are usually associated with recession. While last quarters’ GDP figures still came in positive, there are uncertainties associated with the latest wave of coronavirus. High inflation figures threaten to depress consumer sentiment even further – which would weigh on economic growth in the coming quarters.

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The US stock market, on the other hand, is booming. The market capitalisation of the top five US tech companies is approaching 10 trillion dollars, more than twice as high as the entire market cap of all German companies.

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Meanwhile, the Federal Reserve is finding itself in a rather awkward position. It has persistently promised to keep rates low for longer so the labour market can recover, but now inflation figures are coming in hot. Some Democrats are nonetheless pushing for a progressive agenda at the Fed. PredictIT gives current chairman Jerome Powell a 70% chance of being reappointed by US president Joe Biden.

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As recent gubernatorial elections have shown, Democrats are not doing so well in general, with Biden’s approval rating relatively low. While the 2024 election is still a long way out, prediction markets are currently giving Trump decent odds of being re-elected.

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After climbing steadily since the start of this millennium, investment in Canadian residential property has rocketed in the last year or two. It now accounts for more than 10% of GDP. Could the real estate bubble be about to pop? 

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The pandemic has led to a significant reshuffling of consumer behaviour in the US. Repeated lockdowns last year depressed demand for services while consumption of goods increased thanks to generous stimulus checks and more disposable household income.

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And finally, this might be a good time to buy a new home in the US. The average 30-year mortgage rate has fallen below 3%, while the year-on-year inflation rate has risen to 6%. The inflation-adjusted mortgage rate has therefore never been lower.

Macrobond users, access the chart here