Crashed China to pop equity bubble?

Monday 31 July 2023

Michale Hartnett at BofA on the bubble.

The Biggest Picture: the fastest nominal GDP recovery since WW2 (Chart 2); 10-year yields back >4%, threatening 3.6-4.1% Goldilocks range; oil +19%, diesel +30% (tracks CPI – Chart 4), house prices up, labor flexing muscles (tentative Teamsters/UPS deal = 35% wage jump for 155k part-time workers, 6.5% for 155k full-time; all say Fed “done” & inflation “done & won”…yet 1st week of inflows to TIPS since Aug’22 & FCIs on rise.

Tale of the Tape: Bank of Japan has set “floor” for global rates past 30 years; BoJ 1st to zero rates (Feb’99), 1st to QE (Mar’01), 1st to YCC (Sep’16), has added $1.3tn to global liquidity past 18 months; BoJ set to expand YCC “target range” from 50bps to 75-100bps = tightening = higher floor for global rates (should lead to good entry back into Nikkei).

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.