Weekly Assessments

Week ending Friday December 8th 2017 Little market excitement this week as the S&P500 consolidated the strong 3% upward move to record levels that occurred over the prior two weeks. An impressive performance given the USD was steadily strengthening. At one point, a fall in the 10yr yield squeezed the 10yr-2yr spread to a 10-year low of 50bps, before ending the week where it started. New FOMC Projections out on Thursday with 25bps rate rise There is little interest in next week’s FOMC meeting where a 25bps rise is certain. The statement could provide some interest of course, but most…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Week ending Friday December 1st 2017 Dominating U.S. markets this week was the improved prospects for Trump-sponsored tax cuts. Equities loved the idea of corporate tax cuts even if the benefits ultimately are passed on to the consumer – especially for those corporates that pay corporate taxes. Mostly this is U.S. domestic-focused banks and small/mid-sized companies. Big tech, oil and pharma have many and clever ways to avoid corporate tax thanks to large overseas operations. One thing at a time That said, the tax package is not yet passed in Congress. Until the package is passed and is read by…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Conflicting signals in US

Week ending Friday November 24th 2017 A surprisingly lively week in markets. Equities rose again. The USD weakened. Anyone would think that markets were anticipating an easier monetary policy in the US. One problem is that the best performing equities are those with overseas earnings, not just due to translation benefits from that weak USD but also from strongly performing overseas economies. Another problem is that the yield curve continues to flatten, as the short end yields drive higher and long end yields stays weak. The 10yr less 2yr has now fallen below 60bps. The yield curve is indicating a…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Bond markets continue to flash a warning

Week ending Friday November 17th 2017 A busy week in data but no major signals. Markets were volatile. The USD fell partly due to potential tax reform negatively affecting the deficit and partly due to EUR strength. The grinding flat of the US yield curve continued as the 10yr less 2yr spread dropped towards 60bps from 75bps. Short rates continue to climb higher, but are not budging longer rates. Monetary offset coming soon to the US? US politics was mostly center stage as tax cuts made more progress through Congress but with little clarity on related expenditure cuts. Financial engineering…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Bond markets increasingly pointing towards a slowdown

Week ending Friday November 10th 2017 A quiet week in data and in markets. News on tax reform was also slightly disappointing. Trump was out of the country on his Asia tour and that kept politics out of the news. Yield curve trending to flattest since the GFC The most interesting market indicator by far has been the slope of the yield curve. Short rates have been consistently moving up while long rates have been drifting down – until a modest reversal on Friday. The 10yr less 2yr yield spread has been hitting a series of lows unseen since the…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Week ending Friday November 3rd 2017 Jerome Powell gets a promotion As expected, President Trump named Jerome Powell as his nominee to replace Janet Yellen in February of next year. This is one of the better outcomes that was on the table, and although we would have preferred one of the academic economists who talks about nominal income level targeting, none of them were politically positioned for the job. Powell has tended to be on the right side of issues since he joined the Fed in 2012, and should breeze through Senate confirmation. The best thing about Powell is not…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Week ending Friday October 27th 2017 Lots of noise in equity markets make working out if any macro influences were at play very tricky. We know NASDAQ surged to record highs on Friday after the Thursday-night release of estimate-busting numbers from the big tech stocks. But … the broader S&P500 index was only flat over the week, as non-tech stocks had less exciting results earlier in the week. That meant the Friday gains merely cancelled out the earlier losses. Tax cuts and Fed Chair still dominate The big move in the S&P500 happened during the previous week on the hope…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Week ending Friday October 20th 2017 Fascinating tensions playing out in markets. Undoubtedly, the biggest driver of market movements was the progress towards a big tax cut in the US Senate with seemingly little offsetting spending cuts in prospect. Normally such a deficit-raising, unbalanced outcome would drive an offsetting tightening of monetary policy. This time the tax cut is being played out against a background of leadership change at the Fed that leaves the Fed response uncertain. Does Trump understand monetary offset and is seeking to prevent it with one of his famous deals? Obviously not. Could it be an…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Consolidation

Week ending Friday October 13th 2017 Market indicators took a breather last week after a few weeks of sustained optimism had modestly lit up growth expectations and our NGDP Forecast. The Fed questioning its understanding of the economy, especially the drivers of inflation, is perversely positive for the inflation outlook. If markets do not believe that the Fed has a weakened belief in the Phillips Curve, then it is more likely that Phillips Curve-like outcomes will occur. Markets The very strong equity-reporting season was anticipate, so actual equity earnings reports are a bit on the disappointing side of things. Therefore,…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Week ending Friday October 6th 2017 A strong week for markets with equities, USD, copper and bond yields all moving up. Markets are very much looking through any weather-related damage to the economy in 2017Q3. Markets Equity markets are still excited by the prospect of a juicy 2017Q3 earnings season starting next week, as most firms will feel the boost from the weak USD in the quarter versus the prior year and prior quarter. This tailwind will unwind eventually and mean little in the longer term – and could turn into a headwind if recent USD strength continues. Short-term bond…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share