Tag Archives: 5) Global Macro

In the world of assets classes, I don’t believe it is equities which hold the Federal Reserve’s attention. After the 2006-11 debacle, the big bust, you can at least understand why policymakers might be more attuned to real estate no matter how the NYSE trades. It may be a decade ago, but that’s the one thing out of the Global Financial Crisis which was seared into the consciousness of everyone who lived through it....

Signs of a potential global recession are appearing, such as a fall in fixed investment and industrial production and a build-up in unwanted inventories. We are revising down our world growth forecast. The effects of a negative shock dating back to early 2018 are still being propagated throughout the world economy. Sentiment was the first to be hit, but there have been increasing signs of a marked slowdown in hard data...

Even the most distracted, fragmented tribe of the peasantry eventually notices that they’re not in the top 1%, or the top 0.1%. Let’s posit that America will confront a Great Crisis in the next decade. This is the presumption of The Fourth Turning, a 4-generational cycle of 80 years that correlates rather neatly with the Great Crises of the past: 1781 (Revolutionary War, constitutional crisis); 1861 (Civil War) and 1941...

It’s been a slow turnin’ From the inside out A slow turnin’ But you come about Slow learnin’ But you learn to sway A slow turnin’ baby Not fade away Now I’m in my car I got the radio on I’m yellin’ at the kids in the back ‘Cause they’re bangin’ like Charlie Watts Slow Turning by John Hiatt “How did you go bankrupt?” Bill asked. “Two ways”, Mike said. “Gradually and then suddenly.” The Sun Also Rises, By Ernest...

For there to be a second half rebound, there has to be some established baseline growth. Whatever might have happened, if it was due to “transitory” factors temporarily interrupting the economic track then once those dissipate the economy easily gets back on track because the track itself was never bothered. More and more, though, it appears at least elsewhere that the track was bothered. Whether China, Singapore, or...

The likelihood of active FX intervention by the US authorities remains low but is increasing and the Trump administration can be expected to continue to pressure the Fed to cut rates. The Trump administration has been focusing on the US’s trade deficit with some of its main trading partners such as China and Germany. A strong dollar is exacerbating this deficit and has visibly exasperated President Trump. Indeed, the...

Downward pressure on growth persists amid ongoing trade tensions. Chinese real GDP growth came in at 6.2% year-over-year (y-o-y) in Q2, down from 6.4% in Q1, and the lowest quarterly growth in over two decades. The tertiary sector (mainly services) continued to lead growth, expanding by 7.0% y-o-y in Q2, the same as in Q1. In comparison, growth in the secondary sector (mainly manufacturing) declined to 5.6% y-o-y, from...

Fed dovishness is helping to curb financing costs for corporates but does not seem to be percolating down to the US consumer, whose debt-servicing costs are rising. This could be something to watch. The Federal Reserve (Fed)’s leading priority now is to help sustain the US business cycle, hence the concept of ‘insurance’ rate cuts put forward by Fed chairman Jerome Powell, with some echoes of Alan Greenspan’s philosophy...

It’s a clever bit of misdirection. In one of the last interviews he gave before passing away, Milton Friedman talked about the true strength of central banks. It wasn’t money and monetary policy, instead he admitted that what they’re really good at is PR. Maybe that’s why you really can’t tell the difference Greenspan to Bernanke to Yellen to Powell no matter what happens. Testifying before Congress today, in prepared...

The Fed will likely cut rates by 25 basis points on 31 July, with a similar cut possible as early as September. During his testimony before the House of Representatives on Wednesday, Federal Reserve Chairman Jerome Powell repeated the dovish signals he gave at the Fed press conference in June, hinting at a rate cut at the next Federal Open Market Committee (FOMC) meeting on 31 July. Powell’s priority is to preserve the...