It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, itContinueContinue reading “A Tale of Two Cities”
Author Archives: Journeyman
Should The Fed Cut Policy Rate If U.S. Growth Remains Strong?
Exceptional U.S. growth continues to be seen in the last quarter of 2023 and beginning of this year, with Q4/23 reading shows the U.S. economy expanding 0.8% q/q (3.2% annualized), slightly higher than the 2% trend growth observed over the past two decades, while the rest of the world lagging. The Euro Area, Canada, andContinueContinue reading “Should The Fed Cut Policy Rate If U.S. Growth Remains Strong?”
Update on Equity Sector Outlook
The U.S. economy continues to show economic resilience, with GDP expanding 0.8% q/q (3.2% annualized) in the final quarter of 2023. It appears that resilience continues into the new year with the Atlanta Fed GDPNow currently pointing to a 2.8% q/q (annualized) expansion for the first quarter. In addition, ISM Manufacturing and Services PMI mayContinueContinue reading “Update on Equity Sector Outlook”
The Landing: View from the Cockpit
Two years ago, when inflation started to accelerate across the developed world and central banks were expected to hike policy rates, global macro strategists saw dark clouds on the horizon that the global economy will have to pass through. The last time inflation went out of control was in the late 1970’s, which coincided withContinueContinue reading “The Landing: View from the Cockpit”
Softer But Not Soft: 7 Top-of-mind Risks for 2024 and What to Do About It
It is only one month to go before 2023 official ended and the U.S. economy is turned out to be much more resilient than we previously thought at the beginning of the year. Consumer spending continues to be significantly above pre-pandemic trend, even after adjusting for inflation, and both unemployment rate and jobless claims remainContinueContinue reading “Softer But Not Soft: 7 Top-of-mind Risks for 2024 and What to Do About It”
Fiscal Dominance, Softening Employment and Manufacturing Relapse
U.S. 10-year treasury yield rose significantly (+60 bps) in October amid strong Q3/23 GDP, reaching as high as 5%, before abruptly reversing this week following favourable treasury funding plan, lower-than-expected ADP employment and non-farm payrolls, and unexpectedly weak ISM manufacturing PMI. This trifecta of good news for bonds has translated to U.S. 10-year yield fallingContinueContinue reading “Fiscal Dominance, Softening Employment and Manufacturing Relapse”
The Big Picture: Economic Cycle and Market Mean-reversion
The structural decline in long-term yields since 1980 until the covid-19 pandemic had been accompanied by investors complaining that the search of attractive investment opportunities was becoming more difficult over time. The decline in borrowing cost also has a significant ramification for global investors, including boosting stock buyback amid lack of investment opportunities, breeding ofContinueContinue reading “The Big Picture: Economic Cycle and Market Mean-reversion”
Assessing U.S. Consumers’ Health, Crisis in the East, and Repricing the Cost of Capital
The resurgence of the long end of the yield curve back to the high in October 2022 has puzzled many strategists and investors. Compared to last year when CPI inflation was at 8.3% y/y and the Fed was barely halfway through its monetary policy tightening cycle, CPI inflation today has fallen to 3.2% y/y (July)ContinueContinue reading “Assessing U.S. Consumers’ Health, Crisis in the East, and Repricing the Cost of Capital”
Fundamentals vs Market Pricing
The combination of declining inflation and easing labor market condition has so far been interpreted by the market as signs that the U.S. economy will be able to stage a soft landing – a softening in growth without significant pick up in unemployment – before a new cycle begins. The equity market is disregarding theContinueContinue reading “Fundamentals vs Market Pricing”
Cyclical/Defensive Stocks Are Pointing to a Bottom in Manufacturing Activities. Are We Entering a New Cycle?
In June Bank of Canada unexpectedly raise its policy rate by 25 bps, defying the expectations that Canadian policymakers are done with their rate-hiking campaign. Investors learned that after a well-telegraphed “pause” central banks could again tighten the screw. Yields across the developed world surged following the BoC’s decision. Meanwhile, in the U.S. Fed ChairmanContinueContinue reading “Cyclical/Defensive Stocks Are Pointing to a Bottom in Manufacturing Activities. Are We Entering a New Cycle?”
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