Barclays with the note: The final print of the June University of Michigan measure revised five- to ten-year inflation expectations down to 3.1%, from 3.3% in the preliminary print. The softer long-term expectation may give the FOMC some comfort, though additional readings and July CPI will be key to watch for more stable signs. The
Some eye-popping charts from Deutsche. Bonds worst in 250 years: Stocks worst since Great Depression: Pain! Recession cometh: And it will be deep because the Fed can’t turn early: As Jim Reid himself says: H2 is probably quite binary. If we don’t see a recession materialise over that period it might be tough for markets
Nomura wakes in fright. My only issue with this analysis is that it may still be too slow, inflation will bust faster and rates not get so high. — With rapidly slowing growth momentum and a Fed committed to restoring price stability, Nomura believes a mild recession starting in Q4 2022 is now more likely than
JPM: Two developments since the May CPI report reinforce the case for a more hawkish FOMC meeting on Wednesday, in our view. First, the startling rise in the longer-term inflation expectations in the University of Michigan’s consumer sentiment survey could imply a higher level of the nominal neutral interest rate. Second, according to the WSJ
The Daily Shot with a million charts: 1. The jobs market held up better than expected in May, … Source: @TheTerminal, Bloomberg Finance L.P. … with total employment nearing the pre-COVID peak. • Here is the labor market recovery by industry wage tier. Source: Mizuho Securities USA • The retail sector registered some job losses. Source: @WSJ Read full
Tomorrow’s US jobs report will determine the immediate fate of the reflation rally. Goldman has more. — We estimate nonfarm payrolls rose by 225k in May (mom sa), a slowdown from the +428k pace in both of the previous two months and below consensus of+323k. Job growth tends to slow during the spring hiring season
A peak under the hood of the US economy with Goldman. Financial conditions still way loose, man: But growth trending down: And negative surprises mounting: Capex still OK but that’s trailing: ISM doing the swan dive: Following the consumer: Whoa! Onwards and downwards!
The robot whisperer Charlie McElligott at Nomura. Sounds right to me. — Fade the #fake news Bostic September “pause” meme—where despite likely being past “peak hawkish / peak inflation / peak rate vol,” that does not mean that all three cannot stay persistently higher (SEP projections update coming, ECB rate vol catalyst, Crude Oil, QT
A win for the US liberal empire in the Pacific over the weekend: China’s aggressive bid to exert power in the South Pacific will meet strong resistance if Fiji’s former prime minister Sitiveni Rabuka returns to office this year, with the two-time coup leader vowing to side with Australia as Beijing steps up its battle
BofA with the speculation: A tenuous but remarkable change in communication We saw a notable change in communication from the Fed in recent weeks as financial conditions have tightened sharply (see Exhibit 1), the economic outlook has deteriorated moderately (see more “stag”, more “flation”) and the threat of runaway inflation appears to have subsided (for
Goldman explores the question. It looks increasingly likely that the long-bond yields have peaked a US growth fades away. But whether the Fed can stop is another question. I still think it needs to break the commodity complex before it pivots. — 1. From tightening to growth fear to peak inflation. A few weeks ago,
BofA with a quick insight into why the Fed is not worried about stock prices right now. — As the equity market continues to sell off, investors are asking: what does this mean for the economy and how bad does it need to be for the Fed to pause? On these questions, a picture is
Goldman with an interesting, Basically, US rate shocks are Chinese growth shocks. — Our global financial conditions index (FCI) has tightened, in part because the Fedhas turned more hawkish in the face of rising inflation but slowing growth. Where are risks to growth from FCI spillovers largest? We estimate rules of thumb for the impact
Zero Hedge with a vital piece. Be careful of ZH’s excitable editorial style. Nonetheless, it does provide some good evidence that the US labour market is coming off. Most critically, it is entirely possible that COVID and the supply chain panic has led to over-employment which could reverse more quickly than even I anticipate. —
Goldman with the note. The more we rally here the more this tightening is undone. Moreover, US growth needs to fall below potential if inflation is to fall. I am no inflationista but still think more will be required in the US. Our US Financial Conditions Index (FCI) has tightened by 80bp since Fed officials
Calculated Risk does the analysis. CR was superb in the lead-up to the GFC (and ever since). Bill McBride is neither a rusted-on bull nor bear. If he is right then the Fed has more work to do. — It is clear that over the next year house price growth will slow from the torrid
Deutsche with some alternative methods for measuring US financial conditions. I completely agree that the market has the extent of rate hikes wrong. But I still see a few more before it all goes to shit. Almost by definition the Fed has to over-tighten before it stops. — A Volcker-like rise in the shadow rate
ZH reporting on a chat with Fed chair Jay Powell this morning. In my view, the Fed has to break oil before it can pivot. — Speaking on MarketPlace Radio this evening, Powell said the central bank has both the tools and resolve to bring down rapid inflation — though he acknowledged that the path to
The US housing market is beginning to crack as mortgage rates surge higher. Affordability has been smashed: Demand has broken down: With worse to come: At least the debt is not extreme meaning a balance sheet recession is unlikely: More likely is that there will be spillovers to consumption as prices rollover. That will take
BofA data. It doesn’t look too good for goods volumes to me. — Truck Shipper Survey #255, week of April 21, 2022 This week, our proprietary bi-weekly BofA Truckload Demand Indicator for shippers’ 0- to 3-month freight demand outlook fell further, to 58.0, down from 64.1 last issue, the fourth consecutive decline, and the lowest
Calculated Risk recently argued that the correct analogy for the US property market this rate hiking cycle is not 2008 but the 1970s. Back then, prices fell in real terms while posting slight nominal gains but the real action was in new starts which boomed and busted with inflation and rate cycles. That pattern may
Albert Edwards with an entertaining read. I don’t know where the US terminal rate level is, other than it is much lower than markets think. Moreover, if the SocGen estimate of real monetary tightening via QT is accurate then the question arises how can monetary conditions tighten enough so quickly to spook the Fed into
It looks ugly for risk assets as it shrinks demand to fit constrained supply. Goldman: — BOTTOM LINE: The March FOMC minutes revealed some of the key parameters of the balance sheet reduction process, including that the monthly cap would likely be set at $95bn—split $60bn-$35bn between Treasury and mortgage-backed securities—and that the caps would
Former Federal Reserve Bank of New York President Bill Dudley: Here’s the problem: Whenever stocks rally, FCI loosens. Ipso facto when the Fed wants tightening…
More from inside the US freight market where inventories are extreme and volumes falling fast. If this continues then it flows straight back up the supply chain to China and Europe where domestic demand is already collapsed by war, energy shock, property bust and OMICRON. Today: The trucking market has been slowing since the beginning
