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SAN FRANCISCO (Reuters) – Concerns about housing and crime are dominating San Francisco’s mayoral race, an election that gives voters a chance to choose which path they trust to pull their city out of a slump.San Francisco has come to represent the challenges faced by many large U.S. cities that have struggled with an uneven economic recovery and rising cost of living since the COVID-19 pandemic. To critics of its leadership, the city has become caught in what they call a doom loop, characterized by street homelessness and open-air drug markets. Downtown recovery has been slow, with many empty storefronts and low street traffic.Among major U.S. cities, San Francisco has the highest office vacancy rate at about 32%, according to March 2024 data from real estate company JLL.Against this backdrop, the famously liberal city has begun a political shift, including ballot measures passed this year that put in place new police surveillance technology and mandatory drug screening for recipients of city public assistance.Observers widely expect the upcoming mayoral race to reflect the growing popularity of the moderate-centrist wing of the local Democratic party, which saw gains in March elections.“What voters care about right now are not currently the kind of issues that progressives tend to do well on,” Jason McDaniel, political science professor at San Francisco State University told Reuters.Starting with early voting on Oct. 7, voters will choose from 13 candidates in an instant-runoff, ranked-choice voting system. Incumbent Mayor London Breed, who has been leading the city since a 2018 special election, has four major opponents, all Democrats. Breed has won the endorsement of the San Francisco Democrats.An August poll by the San Francisco Chronicle showed Breed leading, followed by moderate Democrats, former interim Mayor Mark Farrell and philanthropist and heir to the Levi’s fortune Daniel Lurie. Two progressive-left candidates, Aaron Peskin and Ahsha Safai, trailed. The poll showed the top issues among voters were crime and public safety, ahead of housing affordability and homelessness.’STARTING TO FEEL BETTER’A delay in the election may have helped Breed.A ballot measure passed in 2022 moved local elections in San Francisco to even-numbered years, in part in hopes that linking them to presidential elections will increase turnout.That meant rather than running for reelection last November, Breed had an extra 12 months to improve perceptions of her leadership.“Pushing the election back a year, people are starting to feel better about the city”, said McDaniel. Crime rates have fallen 32% year-over-year, according to the San Francisco Police Department. The drop is partly due to increased police resources and better deployed surveillance technologies, Breed said.“We have the systems. It’s working the way it should,” Breed said in an interview.Farrell says far more needs to be done. He promised to hire a new police chief in his first 100 days and said in a debate that he would declare a “fentanyl state of emergency” to access more state and federal resources to fight the scourge of the deadly drug.Breed’s critics also have taken aim at the slow pace of permitting and building new housing under her administration.The city is far behind the state mandated housing goals of adding 82,000 new units between 2023 and 2031. Only around 500 new units had received permits by July, according to the U.S. Housing Department, triggering a state law to streamline the approval process.“Many of our policies have made it very difficult to build, more expensive, and easier for people to oppose housing opportunities when they come to neighborhoods that are traditionally not used to building more housing,” Breed acknowledged. She said she wants to focus on underutilized areas for new construction while maintaining the fabric of the city. San Francisco is famous for its colorful and quaint Victorian homes.In a town where the median household income of the more than 800,000 residents is highest among major U.S. cities, homelessness remains intractable. The latest study showed around 8,000 people in the city are homeless, a figure some advocates say undercounts the population.Breed’s administration has been employing homeless tent sweeps since a June Supreme Court ruling found banning encampments constitutional. Breed has said the sweeps are part of a variety of solutions, including increasing shelter capacity and busing homeless people to family or networks outside the city.Peskin, one of the progressive-left candidates, said people are simply being moved from one neighborhood to another.Lurie, who founded a nonprofit aimed at reducing poverty, said Breed hasn’t done enough to keep people off the streets.Lurie has so far outspent all other candidates, contributing more than $6 million from his own wealth. Contributors to a committee supporting his run include Jan Koum, founder of messaging app WhatsApp, and other tech executives and venture capitalists.Homelessness is “against the law,” Lurie said, “and it’s not compassionate, and it’s not humane to allow people to stay on our streets.” More

“As we enter the final quarter of 2024, we believe the Fed’s desired destination of an economic soft landing is now in sight, decreasing the odds of a near-term recession,” strategists said in a Monday note.“U.S. economic activity has gradually slowed while a window of further disinflation progress has combined with a cooling labor market. These developments prompted the Fed to begin lowering interest rates on September 18 for the first time since the pandemic shock in 2020.”Wells Fargo believes disinflation will continue, which should boost consumer spending and real incomes. They argue that inflation “eased unusually early” this cycle compared to past recessions, allowing for more space for growth.Another significant factor contributing to the soft-landing outlook is the labor market. Despite some expected increases in unemployment, Wells Fargo notes that post-pandemic hiring gaps in sectors like healthcare will likely cushion broader employment declines. The gradual economic slowdown will result in higher unemployment but driven more by new entrants to the workforce rather than layoffs.The service sector, accounting for over two-thirds of U.S. economic activity, remains resilient. This ongoing strength is another cushion against a sharp downturn.“Service industries continue to expand, and we believe these divergent trends still net out to continued economic growth,” the note adds.Financial conditions have also remained accommodative, helping credit-sensitive sectors like small businesses and real estate. Wells Fargo points out that these conditions “are preventing the sort of late-cycle financial squeeze” that typically precedes a recession.Monetary policy is central to Wells Fargo’s view. They believe the Fed’s interest rate cuts are timely and will ease pressure on the economy.”A series of well-timed, more moderate interest-rate cuts by the Fed will provide relief to credit quality,” particularly benefiting lower- and middle-income households, the report states.While uncertainties remain, particularly as the global economy faces challenges in China and Europe, Wells Fargo concludes that a recession is not imminent. Instead, the bank foresees a “bumpy ride into early 2025 before cruising into a mild growth recovery.” More

While these moves have generated optimism in the markets, BCA Research analysts suggest they could be indicators of deeper economic challenges rather than signals of a renewed recovery.As per analysts at BCA, these actions reflect concerns over growing economic weaknesses. In the United States, the Federal Reserve’s focus has shifted from controlling inflation to addressing a cooling labor market, as unemployment rises towards the estimated natural rate of unemployment. Although the initial response to a rate cut can be positive, historical patterns reveal that stock market rallies following such cuts are typically short-lived and followed by declines over the subsequent months. BCA flags that the Fed often cuts rates just before a recession, underscoring that monetary easing can be a forewarning of economic distress rather than a savior.The situation in China echoes similar concerns. Despite the massive stimulus and rate cuts, BCA indicates that these measures may not be sufficient to reverse the ongoing economic slowdown. The Chinese economy, grappling with the aftermath of a burst property bubble, is experiencing a balance-sheet recession characterized by weak demand for credit, low consumer confidence, and diminishing returns from monetary policy. Analysts at BCA argue that without more robust fiscal reforms, including efforts to increase consumption, China’s economic revival may be muted, despite short-term market gains.“We continue to expect that the global economy will fall into recession over the next 6-12 months,” the analysts said. The lagging impact of previous monetary tightening is expected to weigh heavily on economic activity, as rate cuts will not be able to prevent the onset of a recession in time. BCA recommends adopting a cautious approach to investment, with a risk-off portfolio strategy. This includes underweighting equities and credit, favoring government bonds, and maintaining a neutral stance on cash. More

The People’s Bank of China also announced a swap program with an initial size of 500 billion yuan designed to give funds, insurers and brokers easier access to funding needed to purchase stocks. The PBOC also said it would provide up to 300 billion yuan in cheap loans to commercial banks in a bid to help them fund share purchases and buybacks by listed companies.Stocks in China posted their best weekly performance in almost 16 years following the announcement last month, and the upturn continued into this week. Reports last Sunday said that the PBOC would also tell banks to bring down mortgage rates for existing home loans before Oct. 31, marking a further attempt to reinvigorate the beleaguered Chinese real estate market.On Monday, Chinese stocks notched their biggest single-day increase in 16 years, bringing the blue-chip CSI300 index up by almost 30% from a February low that stemmed from fears over the outlook for the world’s second-largest economy.In a note to clients, analysts at Yardeni Research called the measures a “twin bazookas” policy marked by “printing money and spending money.”However, doubt remains over the longevity of the push higher in stocks, they flagged.”The question now is whether this rally is sustainable or is just a short-term bounce after sentiment toward Chinese equities reached extreme pessimism,” the Yardeni analysts said.”Time will tell whether these twin bazookas shoot the silver bullets needed to revive China’s weak consumer demand and ailing property rubble.”The effectiveness of the stimulus measures will likely be signaled by the copper market, the analysts noted. As the world’s biggest consumer of the metal, accounting for a little over half of the world’s copper demand, any significant economic initiatives from Beijing can heavily impact its prices.So far, copper has had a muted reaction, with London prices on Thursday evening below a four-month high of $10,080.50 hit after China unveiled its first wave of new support policies.Despite the spike in Chinese equities, the analysts held to their long-time recommendation that investors should be underweight stocks in the country and overweight US shares.”We aren’t ready to change our position, for now. We continue to believe that Chinese consumer spending will remain structurally weak,” the analysts said. More

In a Monday note to clients, the bank outlines the reasons behind this prediction, noting that the current economic backdrop increasingly mirrors the fundamental criteria of this optimistic scenario.The idea of a “Roaring ‘20s” scenario, likened to the economic boom of the 1990s, hinges on strong GDP growth, moderate inflation, and stable interest rates.Strategists highlight that for this regime to materialize, sustained growth above 2.5%, inflation between 2-3%, and a Fed funds rate of around 3.5% are necessary. These conditions, supported by robust capital expenditure (capex) and AI investments, could boost productivity, resulting in long-term economic benefits.This bullish outlook, which seemed unlikely during the height of inflationary concerns, is now more plausible.Recent revisions to GDP and gross domestic income (GDI) indicate stronger consumer demand than previously thought, with real GDI growth revised up by 1.3 percentage points in 2023 and 0.7 percentage points in 2022. UBS notes that this demand shock has been a significant factor in driving economic performance, keeping recession risks at bay for now.Monetary policy also plays a crucial role in this scenario. UBS sees the Federal Reserve’s recent signaling as supportive of a Roaring ‘20s outcome.“The Fed starting rate cuts with a bold 50bps helps the near-term growth outlook at the margin,” strategists said in the note, with the Fed seemingly focused on maintaining full employment while inflation gradually declines. This approach, they suggest, could buy time for productivity and supply-side improvements to take root.Still, strategists caution that certain challenges could derail this optimistic path, particularly a cooling labor market and sluggish manufacturing activity.A weaker-than-expected jobs report and continued tepid consumer confidence could dampen growth prospects. Moreover, external risks such as the U.S. election, global geopolitical tensions, and the impact of Hurricane Helene could introduce further uncertainty.Overall, UBS remains cautiously optimistic, stating that the odds of a “Roaring ‘20s” economy are rising. The U.S. economy has already met the key criteria for this scenario, according to the bank.The real question now is whether these favorable conditions will persist long enough to create sustained economic prosperity.“With the mid-point of the 2020s only three months away, and the final stage of the post-pandemic normalization underway with the start of Fed rate cuts, it’s no longer too soon nor too optimistic to suggest that the US will experience a Roaring ‘20s economy,” strategists note, pointing to continued improvements on both the demand and supply sides, as well as in terms of monetary policy.“The way things have been trending, it’s quite possible that by early 2025 only the most pessimistic investors will need rose-colored glasses to see a clear path to a Roaring ‘20s outcome,” they concluded. More

In light of revised data on household income and spending, they propose that lower interest rates might help stimulate a rebound in borrowing, thereby supporting consumer spending and possibly preventing a recession.Despite the optimistic outlook, the analysts caution that “household balance sheets have the capacity to lever up.”However, they emphasize that mortgages constitute the largest segment of household debt, and it may take considerable time for mortgage rates to decline sufficiently to invigorate housing activity. The firm believes the lag could hinder immediate benefits from the rate cuts.BCA Research encourages the monitoring of specific household debt and housing market indicators in the coming months that could potentially challenge their current recessionary outlook.They are specifically interested in signs that could indicate a shift in economic conditions, which may affect their predictions and investment strategies.Despite these considerations, the analysts remain cautious. They state, “We don’t yet see sufficient evidence to deviate from our US recession call and portfolio positioning,” which currently emphasizes long-duration investments, curve steepeners, and an underweight stance on spread products.BCA continues to add to its list of indicators to monitor, signaling an openness to adjusting its views if economic conditions evolve.While lower rates could theoretically stimulate borrowing and spending, BCA Research is not yet convinced that these measures will significantly alter the economic trajectory. More

LONDON (Reuters) – British finance minister Rachel Reeves said she will introduce “guardrails” to ensure that extra borrowing for investment in her first budget is not excessive as she seeks to reassure investors about an expected rise in public debt.”It’s about making prudent, sensible investments in the long term and we need guardrails around that”, Reeves told the Financial Times in an interview published late on Friday. Reeves is due to make her first tax-and-spending budget statement on Oct. 30, a milestone for the new Labour government of Prime Minister Keir Starmer who has promised to increase investment in areas such as infrastructure and the transition to a net-zero economy to speed up Britain’s economic growth.With public debt at around 100% of annual economic output, investors are waiting to see how much more borrowing Reeves opts for alongside some tax increases.British gilt yields have risen more than those of other government bonds in recent weeks in part due to concerns about the scale of extra debt sales. At the same time, the warnings about a tough budget have dented consumer confidence, casting a shadow over the first months of the new government.Reeves and Starmer are mindful of how Britain’s bond market was hit in 2022 by the plans for big, unfunded tax cuts of former Prime Minister Liz Truss which forced her to quit.Reeves said the Office for Budget Responsibility, which makes the forecasts that underpin the government’s spending and tax plans, and the National Audit Office, a spending watchdog, would scrutinise her plans for public investment which would incentivise private investment too.”We will make sure that investment genuinely boosts growth and we will look at the role of institutions to demonstrate that, including, for instance, the NAO as well as the OBR,” she told the FT.Reeves said she hoped the implications of higher public investment over a longer period than the OBR’s five-year forecasting period would be taken into account.The former Bank of England economist confirmed she planned to revise the government’s fiscal debt rule to “take account of the benefits of investment, not just the costs,” but declined to say how much extra spending those changes would allow.She also said higher taxes were needed to avoid cuts to already stretched public finances that were implied by the plans of the previous Conservative government.”There won’t be a return to austerity,” she said. “The idea of this budget is to wipe the slate clean and make an honest assessment of spending pressures and tax as well,” Reeves said. “The previous government was relying on a fiction. The budget is an opportunity to bring honesty to the public finances.” More