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Steven Blitz
Managing Director, Global Macro, Chief US Economist
Steven joined the company in 2017. His professional experience as economist and portfolio manager began in the late 1970s.
It includes econometric modelling at Data Resources Inc., creating interest rate and FX derivatives strategies at Salomon Brothers, managing US and global fixed-income portfolios at OFFITBANK, being global head of fixed-income at Lazard Asset Management and, more recently, as Chief Economist at M Science he developed “big data” to underpin his analysis of the economy, central bank policies, and capital market pricing.
Aside from his extensive client-facing work, Steven is a well-known commentator on economic and financial issues, is frequently quoted in the financial press, appearing on TV and radio, and writing guest columns for financial publications.
Steven Blitz's Top Market Calls
The Fed’s Shortened Timeline
We said: From our perspective, the rebound looks rapid enough (chart below right) that by the time 2022 comes to an end, a 0.125% funds rate will be too low even for the FOMC.
Outcome: Market continues to move in this direction, so too with my expectation of “taper”
US CPI is about prices not inflation
We said: In the very near term, the next several months, we expect to see prices rebound as the economy reopens from the mandated shutdowns.. . . Once the economy has reopened, the operating reality shifts to seeing activity settling in well short of capacity, including a sizable overhang of surplus labor. Inflation will then follow along its normal tack.
Cyclical Politics confront Secular Trends
We said:
- A large surplus of low-wage service-sector workers marks this recession, it is also true that mid-skill mid-wage labour never participated in the expansion that just ended
- This recession made the needs differentiating these competing constituent groups more acute, and this adds to the polarization of US politics. This makes the July stimulus package difficult to achieve and makes the 2021 stimulus so difficult to call. Adding to the near-term difficulty are the run of large bounce-back economic data that will underscore the perception among some fiscal conservatives that the economy is quickly on its way get back to square one as the shutdowns end.
- The debt burden and the deficit will be a point of sharp debate in 2021, fuelled by political polarization tied to competing core constituencies
- In the coming cycle, the Fed will have unprecedented influence over firm financing.
- Housing starts will accelerate to levels well beyond what we have seen in the past ten years.
Outcome: The above points have since become internalized and accepted by markets.
Banks would not lend into repo markets
We said: Banks would not lend into repo markets as Fed planned during periods of bank stress – and they did not, precipitating huge expansion of Fed into repo markets beginning late March
Called 75BP cut in funds rate – what happened that Monday
We said: Our guess is that the inflation lessons of the expansion and demands to be responsive to minority employment mean the Fed’s new framework is employment first, and foremost. Typically, the Fed begins to take the punchbowl away as employment approaches full employment on the perception that inflation is not far behind – namely policy runs on the output gap. In the coming cycle, they will simply let employment run until inflation starts to rise. They give themselves the right to do this because the 2% ceiling is now a long-term average, and there have been many years with inflation under 2%. In other words, inflation can run at 4% for a while because the average would still well be within 2%. Of course, everyone has a plan until the first punch is thrown. We will see whether they hold to this policy tack – especially given how by the time full employment shows up, Powell is likely to be long gone as Fed Chair. In the meantime, the essential promise of this policy is that the Fed is going to stay out of the way once the growth cycle takes hold.
Outcome: The above policy was officially announced by Powell at Jackson Hole a month later.
