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Global Leading Indicators, March 2025 - The world before tariffs, and after

The March 2025 edition of the global LEI chartbook can be found here. Additional details on the methodology are available here. I’ve added a few new elements: a chart showing the G20 LEI and its three-year rolling Z-score; a comparison between headline LEI diffusion and global equities; and a chart of the first three principal components of the LEIs. Of these, the first component is the most significant—as I’ll explain below.

As the name suggests, leading indicators are designed to provide early signals on the business cycle, and by extension, on the cyclical component in financial markets and the most cyclical individual sectors. However, there are times when turning points or events disrupt the underlying conditions so abruptly that they effectively reset the clock. Trump’s tariff shock—and its implications for global goods and capital mobility—is one such event. But for the record: what did the global economy look like on the eve of this tariff shock? As it turns out, it was doing quite well.

Things to think about #8 - Mr. Trump, US imports from China and Cultural Wars

At this point, you will have read numerous takes, predictions and analyses of what four more years of Mr. Trump in the White House means. I promise that I will make this short. I think Sam Harris’ “The Reckoning” offers a good explanation of what went wrong for the Democrats and the liberals. I also enjoyed the discussion between Glenn Loury and Daniel Bessner, even if I strongly disagree with Mr. Bessner on a number of key areas. If you want a longer explanation of the ills that have befallen US Democrats, unrelated to the diagnosis of excessive wokeness and identity politics, you should read Thomas Franks’ “Listen, Liberal”, published on the eve of the Democrat’s first loss to Mr. Trump in 2016. It’s all there, with a straight line back to Frank’s earlier identification of the problem when he asked “What’s the Matter with Kansas?” Apart from that, we should also add that Mr. Trump simply ran a superior campaign to Kamala Harris. After all, you don’t win all the swing states through luck or due to bad opposition alone.

Things to think about #7 - Glenn Loury, Life History Theory, LatAm fertility and Substack economics

I am a big fan of US economist and academic Glenn Loury. He is smart, honest and well-articulated. He is also not afraid of an intellectual scrap if he stumbles upon one. He is an indispensable public commentator and intellectual whose ideas and influence go far beyond the confines of race, and associated social issues, in the US where he has staked his claim to fame and authority most comprehensively. Glenn has an impressive back-catalogue of writing and citations, but the best way to get a sense of him is by listening to his podcast the Glenn Show, which can be found on all the usual platforms. I am also a big fan of his co-conspirator, John McWorter, a US linguist and public intellectual, with whom Glenn runs a bi-weekly conversation on his podcast, and Q&A for paying subscribers. It is a must-listen. On this occasion, however, I want to recommend Glenn’s recent discussion with Larry Kotlikoff, a US academic economist, in which they discuss the economic policy ideas of the two candidates in the upcoming US presidential election ideas, and the US economy more generally. As the title of the podcast goes; if only we had an economist in the White House!

All Change?

Last week was a good day for my boss Ian Shepherdson who has been sticking his neck out since the beginning of the year with a call that the Fed would cut rates this year by more than the consensus believes. It was a bad day for a lot of other forecasters and investors. I recently joked with him that we were just one bad payroll report away from markets freaking out. That report landed on Friday, pushing already nervy markets into near meltdown. We know the drill; bonds soared, equities crashed, and “US recession risks” hit a headline near you. Of course, the Fed hasn’t cut rates yet, but even before Friday’s data, everyone expected the first cut in September. Expectations are now shifting towards a 50bp reduction, and further cuts in quick succession after that. The decision to hold rates in July is now freely being seen as a mistake.

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