Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Macroeconomics

<ul>
<li>The Bank of Japan's aggressive purchasing foray in the government bond market under Governor Kuroda now presents legacy issues due to the return of inflation and investors shunning duration risk.</li>
<li>Japan's economy faces rising headwinds in 2025. The minority government has responded to slowing growth by announcing an aggressive fiscal stimulus aimed at boosting near-term activity and reducing headline inflation.</li>
<li>Unwinding of yen carry trades by Japanese investors is unlikely to impact US Treasuries significantly due to healthy demand from domestic investors. Yen-sourced global liquidity has already fallen in 2025.</li>
</ul>


The Bank of Japan's aggressive purchasing foray in the government bond market under Governor Kuroda now presents legacy issues due to the return of inflation and investors shunning duration risk.
Japan's economy faces rising headwinds in 2025. The minority government has responded to slowing growth by announcing an aggressive fiscal stimulus aimed at boosting near-term activity and reducing headline inflation.
Unwinding of yen carry trades by Japanese investors is unlikely to impact US Treasuries significantly due to healthy demand from domestic investors. Yen-sourced global liquidity has already fallen in 2025.


Bank of Japan Policy Outlook Complicated by Fiscal Stimulus and Past Policy Legacies

<ul>
<li>Prolonged quantitative easing by the Fed has made balance sheet shrinkage difficult without producing periods of cash shortages in the banking system, and has raised the neutral federal funds rate.</li>
<li>Regional Federal Reserve Bank Presidents have become more hawkish since September about  inflation, arguing against a December policy easing, but September's Employment Situation report did justify previous policy rate reductions.</li>
<li>Chairman Powell remains cautious about tariffs. Recent historical research by the Federal Reserve Bank of San Francisco suggests that higher unemployment and disinflation are the long-term outcomes of higher tariffs.</li>
</ul>


Prolonged quantitative easing by the Fed has made balance sheet shrinkage difficult without producing periods of cash shortages in the banking system, and has raised the neutral federal funds rate.
Regional Federal Reserve Bank Presidents have become more hawkish since September about  inflation, arguing against a December policy easing, but September's Employment Situation report did justify previous policy rate reductions.
Chairman Powell remains cautious about tariffs. Recent historical research by the Federal Reserve Bank of San Francisco suggests that higher unemployment and disinflation are the long-term outcomes of higher tariffs.


Fed Policy Outlook Heavily Influenced by QE Legacy Issues

<ul>
<li>Concerns about excessive investment activity have occurred before in US economic and financial history. Relative to GDP, the current AI-related infrastructure spending binge already exceeds the internet bubble. </li>
<li>Unlike Japan in the late 1980s, US AI-related infrastructure spending has largely been financed by free cash flow, but debt funding has been rising, thereby raising some concerns.</li>
<li>Assessing AI's impact on earnings growth is complcated by increased circularity within the ecosystem. Metrics are not showing that US equities are in a bubble similar to the late 1990s.</li>
</ul>


Concerns about excessive investment activity have occurred before in US economic and financial history. Relative to GDP, the current AI-related infrastructure spending binge already exceeds the internet bubble. 
Unlike Japan in the late 1980s, US AI-related infrastructure spending has largely been financed by free cash flow, but debt funding has been rising, thereby raising some concerns.
Assessing AI's impact on earnings growth is complcated by increased circularity within the ecosystem. Metrics are not showing that US equities are in a bubble similar to the late 1990s.


AI Spending Binge Imparts Balance Sheet and Funding Changes on Asset-Light Big Tech

<ul>
<li>Falling mortgage rates during 2025 have imparted a limited impact on housing activity.  Rates are higher than recent historic lows,  blunting channels through which lower mortgage rates benefit economic activity.</li>
<li>Poor affordability has been a headwind for housing in recent years., particularly since 2022. Rising home prices have made renting more affordable, notwithstanding supply shortages of desired housing stock.</li>
<li>Rising numbers of smaller households have boosted demand for smaller properties, but developers have been slow to respond to the shift by retaining a trading-up strategy in core urban areas.</li>
</ul>


Falling mortgage rates during 2025 have imparted a limited impact on housing activity.  Rates are higher than recent historic lows,  blunting channels through which lower mortgage rates benefit economic activity.
Poor affordability has been a headwind for housing in recent years., particularly since 2022. Rising home prices have made renting more affordable, notwithstanding supply shortages of desired housing stock.
Rising numbers of smaller households have boosted demand for smaller properties, but developers have been slow to respond to the shift by retaining a trading-up strategy in core urban areas.


Poor Affordability and Structural Issues Take Their Toll on US Housing

<ul>
<li>Although the Fed reduced its policy rate by 25 basis points last week, as expected, Chairman Powell disappointed markets with a hawkish pivot about further declines in 2025.</li>
<li>The cessation of quantitative tightening , effective 1 December, was also announced due to the elimination of excess liquidity in the financial system and strains in repo funding markets.</li>
<li>The elevated demand for repo funding due to high Treasury debt issuance means the Fed has effectively lost control of its balance sheet due to profligate fiscal policy conduct.</li>
</ul>


Although the Fed reduced its policy rate by 25 basis points last week, as expected, Chairman Powell disappointed markets with a hawkish pivot about further declines in 2025.
The cessation of quantitative tightening , effective 1 December, was also announced due to the elimination of excess liquidity in the financial system and strains in repo funding markets.
The elevated demand for repo funding due to high Treasury debt issuance means the Fed has effectively lost control of its balance sheet due to profligate fiscal policy conduct.


End of Quantitative Tightening Partly Eclipsed by Hawkish Pivot by Fed Chairman Powell