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
This is a brilliant story that perfectly captures what the MB Fund has been thinking about inflation for the past eighteen months. It’s a classic example of the inventory supercycle in which stimulus-pumped demand and inhibited supply have tricked the supply chain into double-purchasing and over-investment. As demand hiccup comes through thanks to the Fed,
BofA on the fruits of the Fed for US property. — The worst affordability since the housing “bubble” burst The increase in the 30yr mortgage rate this year has been rapid, surging 160bp in just about 3 months. The benchmark 10y Treasury yield has also risen, but by 94bp. In other words, there has also
There are some perverse things happening in bond yields. Yields are rising in both the US and Australia: But is in the comparative shapes of the curve where we find whackness. At the short end of the curve, Aussie yields are inverted to the US as the RBA remains dovish. It has not been this
Goldman with the note. As they say, it’s not the first rate hike that stocks need to worry about, it is the second-last one. That just moved materially closer. — In a speech earlier today, Chair Powell said, “There is an obvious need to move expeditiously to return the stance of monetary policy to a
Tomorrow is the day. Goldman with the rub. — Chair Powell summed up the compromise that the FOMC appears to have reached by noting in his recent testimony to Congress that he will support a 25bp hike at the March meeting, but is open to hiking by more than 25bp at a future meeting if
It may have to. As noted last week, global financial conditions are tightening at spectacular speed under pressure on all fronts from Ukraine sanctions, the Fed and q rising DXY: This is hammering peripheral global credit spreads and it’s working its way back to the centre as well:: Yet this is all happening before the
Goldman with the note. It’s full steam ahead for the Fed until the market breaks. — BOTTOM LINE: Chair Powell said that he was “inclined to propose and support a 25basis-point rate hike” at the FOMC’s March meeting at today’s hearing in the House Financial Services Committee. Powell also suggested that if inflation is stronger
Goldman with the note. —- Russia-Ukraine tensions have pushed a geopolitical risk index1 developed by the Fed staff to a very high level, as shown in Exhibit 1, and are beginning to have a meaningful impact on global financial markets. Our Europe economics team recently analyzed the effects of Russia-Ukraine tensions on the European economy
Goldman with the note. No 50bps hike there. ———- BOTTOM LINE: The January FOMC minutes indicated that participants judged that it would “soon be appropriate” to raise the federal funds rate, but “some” participants noted that “financial conditions might tighten unduly” in response to rapid monetary policy tightening, suggesting a 50bp hike in March is
Deutsche with the note: Economic forecasters and inflation traders are widely expecting tomorrow’s CPIrelease to show another 7-plus percent number for year-on-year inflation in January, setting up a new record for the post-Volcker era. Compared to a month ago, expectation for the timing of peak inflation has been pushed further back, as both DB economists
Goldman with the note. Not sounding so bullish suddenly: 1. The most important number in the US employment report for January was not the surprising 467k increase in nonfarm payrolls, but the 0.7% increase in average hourly earnings. It reinforces the message from our composition-adjusted wage tracker, which has accelerated to a 6% annualized rate
This is now front and centre for the global growth accident coming swiftly down the pipe. As the Fed tightens, and goods demand normalises let alone falls, the US inventory mountain built up owing to excess demand and supply-side constraints is going to let go and be run down just as both triggers loosen. This
Missed among the Facebook/Amazon microphone drops and the hawks in Brexit-land and Brussels circling around rate levers where the latest US Markit/ISM services PMI and factory orders data for December. Both are suggesting the 2021 economic boom maybe over coming into 2022, just as the Federal Reserve is ready to tackle inflation. More: Markit
George Soros on the warpath: The potential for a massive property sector collapse that infects the entire economy will expose Mr Xi’s flaws in governance, he said. The real estate crisis, characterised by huge debt and triggered by the failure of real estate company Evergrande, could be felt more abruptly in the second quarter of this year,
