In our latest publication, we highlighted that the U.S. economy is potentially at a tipping point where financial conditions are set to tighten as inflation continues to fall and the Fed has been too hawkish relative to economic fundamentals. We wrote: Since July 11th – when U.S. CPI inflation data showed price pressure continues toContinueContinue reading “Rotation Within and Across Asset Class”
Tag Archives: equity
Turning Point in U.S. Economy, Monetary Policy, and Equity Market
Over the past year U.S. economic growth has significantly outpaced the rest of the world as tight labour market condition and robust consumer spending supported real GDP growth above the 2% trend. This contrasts with growth conditions across European and Emerging Market countries, which have fallen to anemic levels, and in China where the country’sContinueContinue reading “Turning Point in U.S. Economy, Monetary Policy, and Equity Market”
Déjà vu on Rates and Justifying Equity Style Divergence
It certainly feels like déjà vu all over again looking at the evolution of policy rate cut expectations in the U.S. this year. At the beginning of 2023 traders were pricing in one rate cut for the remainder of the year. Instead, the Fed raised policy rate by another 100 bps in the following quarters,ContinueContinue reading “Déjà vu on Rates and Justifying Equity Style Divergence”
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”
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?”
Being Defensive: Early or Simply Wrong?
One valuable suggestion my former boss gave me when I started writing macro research note was to imagine myself standing one year in the future, looking back to the events that have transpired since and asking yourself if it should have been more obvious. The regional banking crisis back in March is one of thoseContinueContinue reading “Being Defensive: Early or Simply Wrong?”
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