Weekly Assessments

Week Ending Friday June 15, 2018 Equities flat over the week, a touch weaker after the FOMC meeting but nothing dramatic. Trade war worries were around, especially during Friday but ended up having little impact. The USD was stronger during the week, especially on Thursday, a fascinating day. The USD rose 1.5% initially due to much more dovish than expected ECB meeting that while confirming the end of QE also made it clear it would still be trying to keep policy bias towards easing. Rates were promised not to rise until at least late 2019 despite fears of an imminent… Read More

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Modest optimism returns but growth may not

Week Ending Friday June 8, 2018 Markets recovered some of their poise last weeks. Bond yields fluctuated but ended the week not much different from where they started and equities rallied reaching levels last seen in April. The back-on-again talks with North Korea beat the G7 discord, while expectations for the trade war merely fluctuated. Growth seems to be disappearing in US a bit, elsewhere a lot While NGDP growth in the US has appeared to accelerate into 2018Q1 with a high of 4.7% YoY, the best since 2015Q1, it isn’t quite that good. There were two very strong quarters… Read More

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Week Ending Friday June 1, 2018 Market movements last week implied modestly lower NGDP growth in the coming year. Our market-driven forecast, which we use to cut through the noise and detect the meaning of aggregate market moves, fell from 4.0% to 3.9%, Thursday-to-Thursday. This small move lower reflected lower copper and oil prices, a stronger dollar, lower stocks, lower 5-year TIPS spreads and a more gently sloping yield curve. The 5-year yield fell from 2.82% to 2.68%, and the two-year from 2.5% to 2.4%, while shorted dated bonds were little changed. There were potentially important data releases last week,… Read More

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Oil Pulls Back Amid Heightened Inflation Concerns

The Week Ending Friday May 25th 2018 This last week was light on outlook-changing information even if it was rich in geopolitical news, with Trump’s North Korea peace summit in doubt, and Macron lauding Russia’s President Putin. Financial Media have focused more than usual on idiosyncrasies of individual firms, canned personal finance stories and geopolitical events this past week, as little of note has happened in markets. Our US NGDP forecast, which runs off recent NGDP growth trends and the signal from several financial markets, is consistent with this take. The forecast has been steady since April, hovering just north… Read More

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Near term inflation expectations rising, Fed to clamp down even at cost of real growth

The Week Ending Friday May 18th 2018 What to make of the 10-year bond yields pushing over 3%. On the one hand, 300 bps is just an arbitrary number. Our NGDP Forecast is showing no sign of any dramatic shift in the rate of nominal growth. There has been a trend for us to show nominal growth around 4% instead of 3.5% for some time. Our NGDP Forecast takes in both recent trends in actual NGDP growth and a range of market indicators, not just 10-year bond yields. 30-year bond yields have not moved much. Oil prices have shifted up… Read More

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The Week Ending Friday May 11th 2018 US equities stormed back up last week rising 3%, while the USD was volatile but ended up flat.  Bond yields and commodities were also flat. A reasonable result for nominal growth expectations after the previous week’s disappointment based on USD strength reflecting fears of, or itself being, excessive monetary tightening. The main economic news that partly drove the outcome this week was the weaker than expected Core CPI reading for April. Although hawks tried to claim it was due to some funny one-off movements markets ignored it altogether, thus allowing the great tech… Read More

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Fed keeps its “asymmetry of bias” stance intact – more´s the shame

The Week Ending Friday May 4th 2018 Last week we speculated about a potential negative surprise from a combination of FOMC meeting and data releases. While there were no dramatic moves in markets on any particular day or news release, the newswires were full of an apparent Emerging Markets crisis. Well, on closer examination what they were referring to was EM currency weakness. On a little more examination, many countries, both EM and Developed Markets, show currency weakness versus the USD. When so many countries are seeing “weak” performance of their currencies against the USD, it really means that the… Read More

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The Week Ending Friday April 27th 2018 If panic about WW3 over Korea was bad for markets, the prospect of peace in Korea should be good. The Fed, of course, won’t like such good news and will be happier with its tightening bias as a result. GDP data on Friday might also mean the Fed will tighten more than expected. Q1 GDP better than usual, inflation higher too The US RGDP print was better than expected, the NGDP one was also good YoY at 4.8% even if QoQ at 4.3% was a bit lighter than recent readings. The first quarter… Read More

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The Week Ending Friday April 20th 2018 A few interesting trends in the markets as 10 year bond yields climbed to three year highs. Are they being driven up by rising short term yields powered by rising Fed target rates or in expectation of higher nominal growth? The yield curve is flattening which would indicate a possible slowdown, except that the curve is flattening at higher levels, a good sign. Five-year breakeven (i.e. expected) inflation rates also continued to move above 2%. This move above 2% may not mean a lot as expectations stayed above 2% for many years despite… Read More

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As you were, men

The Week Ending Friday April 13 2018 So, it turns out the Friday mini-crash in US equities was a bit of a false alarm. Sure the market is right to be worried about Powell and his pragmatism, but at least war with Russia seems off the agenda and the trade war seems headed for negotiations. Trump’s early warning to the Syrians to move their assets into Russian bases had the effect of removing targets for the Western allies to hit. So reducing the risk of war. A refocus on equity earnings is in prospect and that should bring good news… Read More

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