Having just read this a week later, with the knowledge that both CPI and PPI are looking more and more like they have bottomed, it seems the real question about growth is whether the government can continue to run its 7% deficit to pump it up. the greatest fear we should all have is that inflation continues this recent trend higher but the growth train derails. as such, higher 10-year yields make sense, but equities may have some trouble
My usual caveats. I would take current GDP estimates with a heavy grain of salt considering contracting GDI. Truflation is still trending down heavily, and could continue (I'm just not sure how much money banks are going to start creating soon). Aggregate hours worked keeps going down (will see how much was weather next month). A lot has to change before I consider reacceleration a real possibility.
I would take into account that real growth may be less than the headlines presume and inflation more in line with truflation. If that's the case, we have a VERY restrictive fed funds rate that would continue to be even after slight cuts.
Seems like we could oscillate like this - yield spikes and equity corrections making bear flags on equity indices, to then climb back out of on subdued growth worries and policy easing - for a while. Just gotta dodge the CRE/bank and BOJ tightening landmines, labor market finally cracking if margins come under too much pressure, or China imploding
Yea feels like something brewing in FX and rates not sure what - RBNz pricing suddenly reversed hard last 48 hrs or so. If all the cuts taken out for other CB that will shift planets for sure
Having just read this a week later, with the knowledge that both CPI and PPI are looking more and more like they have bottomed, it seems the real question about growth is whether the government can continue to run its 7% deficit to pump it up. the greatest fear we should all have is that inflation continues this recent trend higher but the growth train derails. as such, higher 10-year yields make sense, but equities may have some trouble
My usual caveats. I would take current GDP estimates with a heavy grain of salt considering contracting GDI. Truflation is still trending down heavily, and could continue (I'm just not sure how much money banks are going to start creating soon). Aggregate hours worked keeps going down (will see how much was weather next month). A lot has to change before I consider reacceleration a real possibility.
I would take into account that real growth may be less than the headlines presume and inflation more in line with truflation. If that's the case, we have a VERY restrictive fed funds rate that would continue to be even after slight cuts.
Worth keeping in the back of the mind.
Seems like we could oscillate like this - yield spikes and equity corrections making bear flags on equity indices, to then climb back out of on subdued growth worries and policy easing - for a while. Just gotta dodge the CRE/bank and BOJ tightening landmines, labor market finally cracking if margins come under too much pressure, or China imploding
Pump it up.....great analysis and for free. Thanks dude.
And if 10s go to 5-6 pcnt range that puts usdyen north of 160 probably
Yea feels like something brewing in FX and rates not sure what - RBNz pricing suddenly reversed hard last 48 hrs or so. If all the cuts taken out for other CB that will shift planets for sure