Tag Archives: 5) Global Macro

EM should continue to benefit from the generalized improvement in the global backdrop. Trade tensions have eased whilst the risks of a hard Brexit have fallen, at least for now. Yet recent developments in some major EM countries underscores how important it is for investors to differentiate between the strong credits and the weak ones. For instance, South Africa, Hong Kong, Argentina, and Chile all come with idiosyncratic risks.  AMERICAS Chile reports September GDP...

China was the world economy’s best hope in 2017. Like it was the only realistic chance to push out of the post-2008 doldrums, a malaise that has grown increasingly spasmatic and dangerous the longer it goes on. Communist authorities, some of them, anyway, reacted to Euro$ #3’s fallout early on in 2016 by dusting off their Keynes. A stimulus panic that turned out to be more panic than stimulus. China GDP, 2007-2019(see more posts on China Gross Domestic Product, )...

What typically distinguishes recessions from downturns is the inventory cycle. Even in 2008, that was the basis for the Great “Recession.” It was distinguished most prominently by the financial conditions and global-reaching panic, true, but the effects of the monetary crash registered heaviest in the various parts of that inventory process. An economy for whatever reasons slows down. That leads to inventory piling up across the various levels of the supply chain....

Both Brazil and Mexico are in a good position to benefit from the current improvement in market sentiment. However, when comparing the factors driving the currencies of both countries, we think there are relatively more near-term positives for the Mexican peso than for the Brazilian real. These include: (1) the peso will maintain its carry advantage for some time; (2) hedging-related flows should be mixed for the real, but could net as a drag; (3) Mexico’s near-term...

The Federal Reserve has indicated that it will now pause – for a second time, supposedly. Remember the first: after raising its benchmark rates apparatus in December while still talking about an inflationary growth acceleration requiring even more hikes throughout 2019, in a matter of weeks that was transformed into a temporary suspension of them. Expecting the easy disappearance of “transitory” factors, that Fed pause was to be followed by the second half rebound...

What typically distinguishes recessions from downturns is the inventory cycle. Even in 2008, that was the basis for the Great “Recession.” It was distinguished most prominently by the financial conditions and global-reaching panic, true, but the effects of the monetary crash registered heaviest in the various parts of that inventory process. An economy for whatever reasons slows down. That leads to inventory piling up across the various levels of the supply chain....

Where is the line between “working class” and “middle class”? Maybe there isn’t any. Defining the “middle class” has devolved to a pundit parlor game, so let’s get real for a moment (if we dare): the “middle class” is no longer defined by the traditional metrics of income or job type (blue collar, white collar), but by an entirely different set of metrics: 1. Household indebtedness, i.e. how much of the income is devoted to debt service, and 2. How much of the...

The FOMC begins a two-day meeting today with the decision due out tomorrow afternoon.  The Fed is widely expected to cut rates 25 bp for the third meeting in a row.  What’s next? RECENT DEVELOPMENTS US data have undeniably softened in September.  Weakness in the manufacturing sector appears to have spread to the wider economy.  ISM PMI, jobs, CPI, PPI, and retail sales all came in weaker than expected.  So too have inflation expectations.  October data is just...

Another local election in Germany, another stunning defeat for the ruling center. How many more of these does anyone need before they realize the electorate is going to keep migrating toward the poles? And it all stems from the one reason; there is no and has been no economic growth. But because the so-called establishment has insisted the economy is booming, or it was, people are doing what people always do. They look for someone, anyone who can give them a...

Is the recession scare over? Can we all come out from under our desks now? The market based economic indicators I follow have improved since my last update two months ago. The 10 year Treasury rate has moved 40 basis points off its low. Real interest rates have moved up as well but not quite as much. The difference is reflected in slightly higher inflation expectations. The yield curve has also steepened as the 10 year Treasury yield rose faster than the 2 year. This...