Morgan Stanley with the note. Rate of change is the most important and misunderstood idea in macromarkets: Tapering is Tightening but Tightening began months ago. The Fed’s pivot to begin the tightening discussion caught most by surprise, but markets began discounting this inevitable process months ago in our view. It’s exactly what the mid cycle
You can show a traitor a noose but you can’t stop him from sticking his head in it. For years I have warned prominent Australian investors not to invest in China and watched as they all lost a lot of money. The reason why is not even China’s deteriorating geopolitical circumstances. It is that sovereign
Goldman with the note: The FOMC left the funds rate target range unchanged at 0–0.25% at the June meeting, and raised the IOER and RRP rates by 5bp. The median projected path for the policy rate in the Summary of Economic Projections (SEP) increased to show two hikes by 2023, despite almost no change in
BofA with the note: The economy is facing an imbalance: a burst in demand has been met with constrained supply. Economics 101 tells us that when the demand curve shifts more than the supply curve, prices will rise, which continues until the balance is restored from a combination of slowing demand and greater supply. This
Some interesting sector-level trends in US credit card spending. Services spending is normalising swiftly as reopening gathers pace. There are early signs that goods spending is falling away as well: Eating out is now up on pre-pandemic levels. Travel is roaring back to almost unchanged from 2019. I expect a big overshoot ahead. Interestingly, goods
Nordea with the note. I see US inflation tumbling next year: We see clear risks of a big positive surprise to the May inflation report as well with core inflation around or just above 4%. The market is still buying the transitory inflation narrative but for how long? Lately, increasing (US) inflation has been the
Deutsche with the note: Since the last CoTD, Bloomberg’s US financial conditions index has eased to fresh14-plus year highs. This index looks at money markets, various credit spreads and equity markets. However Bloomberg also compiles a financial conditions “plus” index where they include indicators of asset-price bubbles incorporating tech shares, housing markets and additional yield
Goldman with the note: President Biden released his budget proposal to Congress, which calls for an increase in the deficit of $800bn over 10 years (0.3% of GDP over that period) to accommodate his “American Jobs Plan” (AJP) and “American Families Plan”(AFP). While the amount is not surprising, this is the first time the White
BNP with the note: The April payrolls report was a historic surprise to the downside, and in our view evidence of supply constraints–be they supplemental federal unemployment benefits, residual Covid-19 fears, childcare demands, or pulled-forward retirements–materially limiting job gains. While our view is that these constraints will prove to be temporary, some evidence is emerging
Being rich and tough is just not enough, apparently. In a recent promotional tour for Fast&Furious 9, John Cena called Taiwan a country. Now he is on his knees kissing CCP freckle: The 44-year-old American, who made the comment on Taiwanese broadcasting network TVBS during a promotional tour for the Hollywood blockbuster Fast & Furious
As inflation-deluded markets begin to wake to the China deflation shock that’s been obvious to MB readers for months, I am beginning to wonder if what lies ahead is a little less benign than my original thoughts. There is no cause for panic. If the worst were to come to pass and a market accident
A great note from Nataxis on US inflation. Chill! Historical Backdrop In the post-WWII period, the United States has seen just a couple of problematic periods of significant inflation. The most recent of which was a 10-year period with two bursts of accelerating inflation in the 70s/80s. First, inflation quickly accelerated in 1973, before peaking
Is a new US housing bubble inflating? US house prices have been on the march with global prices. Is this a rerun of the pre-GFC period when prices were driven wild by the worst collapse in lending standards in history? Or is this something different? Deutsche is worried: Around many parts of the world housing
This is what happens when you have a competent vaccine rollout. No prison island. No budget bribes to offset it. Just folks getting on planes and traveling their butts off: At the current rate of rebound, the US will exceed 2019 travel volumes by August this year: What follows is a boom. And when I
The bond backup is back and risk assets don’t like it with all kinds of action around the Australian dollar last night. DXY took off: The Australian dollar was pounded against all DMs: Gold was smacked. Oil held: Base metals flamed out: Big miners rolled over: EM stocks look like a suicidal cliff jumped: Junk
BofA with the note. I agree with the conclusions: Four futures for inflation A different asset allocation is warranted depending on what you believe about inflation and its effects. 1. Transitory and good: on this view, the good news about“bad” prices is that those prices are a sign of a faster-than-expected economic rebound. Temporary frictions
Standard Chartered with the note. Recall that they were just about the most bullish in the market prior to the release: Work disincentives likely a future issue, but not in April There is a lot of discussion on the big forecast miss of April non-farm payrolls (NFP). The consensus was for around 1mn jobs, our forecast
Deutsche with the note on why elevated US activity and inflation are not over yet: Sorry, we’re out of stock So far, share markets have been relatively calm about supply chain problems. This could signal investor complacency given that reports of supply chain shortages and price jumps have been hard to avoid. One of the
There are lots of US jobs report bulls out there. My own experience is twofold. Jobs reports are not much easier to trade than GDP reports. That said, jobs reports have typically overshot in pandemic recoveries. Standard Chartered takes that to the extreme in a new note. We expect the US April non-farm payroll report
The excellent chaps at Nordea with the note: In our sister product, the week ahead, we mulled, if we are not experiencing something akin to a crack-up boom as the Austrian’s (Mises, Rothbard, …) describe it. The latest FOMC decision at least did nothing to assuage such fears – everything is transitory for Powell, it seems. From what
It’s usually worth listening to Larry Summers. Although he is too close to Wall St, he has got a good record of forecasting and defining the big numbers of given cycle: Forthcoming Biden stimulus risk inflation. Progressiveness tend to economic “overreach”. Labor is already short before $4tr of new stimulus. I am not concerned by
As expected at MB Fund, the new US profits boom is nothing short of extraordinary, tearing the roof already inflated expectations, via BofA: Corporate America delivers again; tracking an 18% beat So far, 303 S&P 500 companies comprising 78% of earnings have reported, and 1Q EPS is now tracking at an 18% beat, exceeding last
Last night’s ISM put the wind up forex markets: “The April Manufacturing PMI® registered 60.7 percent, a decrease of 4 percentage points from the March reading of 64.7 percent. This figure indicates expansion in the overall economy for the 11th month in a row after contraction in April 2020. The New Orders Index registered 64.3 percent,
Look’s like the US Federal Reserve is “looking through” the blip in inflation figures in the US and has remained very accomodative overnight in its latest statement and subsequent press conference with no talking of tapering. The USD dropped against most of the majors on the release, but stocks were non-plussed and barely moved. At
TS Lombard with the note: The next Fed risk is the taper, likely to be announced in the summer.This is priced in–and the effect on net issuance is smaller than in 2014 or 2017 But no matter how well telegraphed, this taper will still change the market as a price-insensitive buyer leaves and the clock
We have noted a few times recently that the US economy faces a hiccup later this year and early next as its fiscal stimulus growth pulse crashes with year-on-year comparisons. This goes to the often overlooked fact that when it comes to GDP growth inputs, it is the rate of change in spending that matters
Goldman has a crack: The Treasury has released a new more detailed description of its corporate tax proposals. They are in line with the outline from the White House last week, but include a few new details related to the treatment of foreign income and the minimum tax on book income. Overall, Treasury estimates the
Markets clearly think it’s coming very fast. Fed fund futures are pricing two cash rate hikes for 2022, let alone tapering of asset purchases, which will have to come first: That is far too aggressive to my mind. US inflation is going to fall away next year as commodities deflate while China slows, even if
This is what happens when you have a competent government. Vaccines unleash pent-up demand. The US is entering a rude travel boom. Mobility is surging: Credit card spending on travel is surging: Boosted by stimulus: TSA numbers are climbing fast: My base case is that US travel overshoots this year and next as family, recreational
Goldman has the details: 1. The White House proposes to spend roughly $2.2 trillion over ten years. The Administration expects most of this spending to be complete after 8 years. This appears to be mostly new money with less double-counting of existing spending than in last year’s $1.5 trillion House bill. Of the $2 trillion, around
