Raphael Stevens

THE SCALE of Joe Biden’s plans is hard to exaggerate. Where the American president’s former boss, Barack Obama, pivoted quickly to deficit-cutting after the trials of the global financial crisis, Mr Biden’s first budget, which he unveiled on May 28th, will borrow unapologetically. The plans assume that annual fiscal deficits will exceed 4% of GDP through to the end of the decade; net public debt will rise to 117% of GDP in 2030 from 110% today. The largesse raises two big questions. One is whether, coming on top of past stimulus packages, it will contribute to an overheating of America’s economy in the short term. The other important question is whether in the longer term America can prudently afford to loosen the purse-strings for a sustained period. As crisis has hit and interest rates have fallen, politicians have felt more able to run up debts than in the past. But the issue of whether and when limits to borrowing might apply still remains. Recent research casts light on these constraints.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

IN ITS LATEST Economic Outlook, the OECD argues that economies are likely to diverge, as some (America and China) recover from the pandemic faster than others (many poor countries). Covid-19 has also struck different sectors differently: tech and pharmaceutical firms prospered; transport and energy firms suffered. Despite such disparities governments’ policies successfully put the economy into “hibernation”: in many places there were fewer bankruptcies in the final quarter of 2020 than in 2019. The trickiness now is in judging when activity is strong enough for support to be withdrawn.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

STATE CASH is burning a hole in the pocket of Shenzhen’s Communist Party secretary. Wang Weizhong told angel investors late last year that if they set up a fund in the south China tech hub, the government would bear 40% of their losses. For the monstrous 400bn-yuan ($62bn) state fund backing such activity, an investment of 3m yuan—the size of a typical angel investment—is a rounding error. For private investors the invitation sounds too good to be true. It might be.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

PLANES NO LONGER land in Kai Tak, Hong Kong’s old airport. But nostalgists can stroll along the new “sky garden”, an elevated walkway lined with frangipani, myrtle and acacia, that passes above the old runway. By scanning a QR code along the route, visitors can “augment reality” by superimposing an image of a landing plane on their selfies. The park is part of a redevelopment plan that will eventually yield a hospital, tax office and new homes for tens of thousands of people. On either side of the walkway, cranes, diggers and welders labour busily to augment the reality of Hong Kong’s cramped and pricey housing.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

A top investor expects volatility to dominate Wall Street for months.Amanda Agati, PNC Financial’s chief investment officer, lists stretched market valuations, Federal Reserve taper chatter and the end of stimulus checks as troubling forces in the market.”You have to pick and choose your exposures very, very carefully,” Agati said on CNBC’s “Trading Nation” on Thursday. “This is not a scenario where we think there’s a rising tide that lifts all boats — certainly not at such elevated valuation levels for both equities and fixed income.”A major portion of her forecast includes an “unusual” volatility dynamic affecting both stocks and bonds right now.According to Agati, the CBOE Volatility Index, or VIX, which is considered the market’s fear gauge and reflects future volatility over a monthly time span, is back to its historical average. But she notes all contracts are still higher than January 2020, before the pandemic hit the United States.Meanwhile, Agati is finding the bond market’s equivalent of the VIX, the Merrill Lynch MOVE Index, is sitting at spring 2020’s highs.Agati warns the two trends spell bigger price swings ahead.”We’re likely to see larger than normal price swings,” said Agati, who has $175 billion in assets under management.She sees Federal Reserve policy as the biggest overall risk to the markets.”I don’t really believe that inflation is the key risk in terms of the path forward for the markets,” Agati said. “We actually think it’s that five-letter word that we’ve started to hear some Fed governors utter more recently, and that is ‘taper.”‘A warning for Reddit tradersAgati expects that as stimulus checks cease, highly speculative trades driven by the Reddit rebellion, including those of AMC Entertainment and GameStop, will unwind by summer’s end.”It’s a friendly reminder that the markets have been really propped up by a lot of policy accommodation and stimulus over the course of the pandemic,” said Agati. “We have a fiscal cliff coming in September, and so I think that will change the game pretty meaningfully for small cap value exposures at that time.”For the most reliable gains, she’s advising investors to consider going abroad. Agati finds emerging markets attractive. She continues to own and add exposure to the area.”It’s a nice hedge against an inflationary backdrop,” she said. “If you zoom out and look at the longer-term growth prospects, it’s the brightest star in the equity asset class universe, definitely growing — from an economic and earnings perspective — from a much higher base relative to the rest of the developed world.”Agati’s volatility forecast may not include an official market correction warning, but it’s something that clearly concerns her.”When you look at historical analysis and data, we’re long overdue for a meaningful correction, and last time we saw it on the S&P 500 was September of last year,” Agati said.As of Thursday’s close, the S&P 500 and Dow are 1% and 1.5%, respectively, off their all-time highs. The tech-heavy Nasdaq is down 4% from its record high.Disclaimer More

U.S. stock futures were little changed in overnight trading Thursday ahead of the May jobs report.Dow Jones Industrial Average futures rose just 9 points. S&P 500 futures lost 0.01% and Nasdaq 100 futures ticked 0.03% lower.Investors have been waiting for the Labor Department’s release of May’s nonfarm payrolls report that comes out Friday morning, with stocks holding near record highs.Economists expect the report to show 671,000 jobs were added in May, according to economists polled by Dow Jones. The economy added 266,000 jobs in April.”While the supply of labor is definitely an issue relative to the high level of job openings, I wouldn’t be surprised to see an upside figure relative to expectations just as the April figure so badly missed,” Bleakley Advisory Group chief investment officer Peter Boockvar told CNBC. “Key also will be the wage component as we hear almost every day the need of companies to pay up for workers. Now we get to see to what extent.”The “May jobs data will be a key factor in determining the path of Fed policy in coming months,” Citigroup economists noted. They forecast 760,000 jobs for May and said a repeat of April’s weak report could mean the Federal Reserve will not taper its bond purchases until next year.The major averages closed lower on Thursday as gains in economic comeback plays were offset by declines in tech shares. The Dow Jones Industrial Average fell 23 points, after dropping as much as 265 points. The S&P 500 slid nearly 0.4%. The Nasdaq Composite was the relative underperformer, dipping more than 1% as Facebook, Amazon, Apple, Netflix and Google-parent Alphabet dropped.Boosting sentiment around economic reopening, May’s private job growth rose at its fastest clip in nearly a year as companies hired nearly a million workers, according to ADP. Total hires came to 978,000 for the month, a big jump from April’s 654,000 and the largest gain since June 2020. Economists surveyed by Dow Jones had been looking for 680,000.The latest unemployment data released Thursday was also better than expected. First-time claims for unemployment benefits for the week ended May 29 totaled 385,000, compared to the Dow Jones estimate of 393,000. It also marked the first time that jobless claims fell below 400,000 since the early days of the pandemic.Meme stocks continued their wild prices swings on Thursday, especially AMC Entertainment. The movie theater operator said Thursday morning it was going to sell 11.5 million shares only to announce several hours later it already completed its stock offering, raising $587.4 million in additional capital.AMC closed down nearly 18%. Other meme stocks like Blackberry also experienced volatility on Thursday.Enjoyed this article?For exclusive stock picks, investment ideas and CNBC global livestreamSign up for CNBC ProStart your free trial now— with reporting from CNBC’s Patti Domm. More