Economic expectations across the Eurozone are tumbling even while the assessment of current activity remains rosy. The Stoxx 50 will likely struggle given this divergence. But, do not rush to recession talk as these very surveys have disconnected from realized economic growth.
Yesterday's TIC release updates data through the end of February, so it is still too early to put Chinese Treasury holdings under a microscope in light of the steel tariffs.
Today's topics include earnings season, Rich Clarida's appointment to the Fed, housing starts, bearish talk, the commodities rally, dividend paying stocks, SOFR and Wall Street work environments.
An end to concerted global growth and shift to tightening by major central banks will likely keep a lid on market-based inflation expectations like U.S. TIPS breakevens. Financial stress has shed its negative correlation to tightening expectations, meaning rate hikes are finally viewed as a contractionary hindrance.
The rising Treasury issuance story faded into the background in recent weeks. A rise in net new issuance driven by lower retirements in May could bring the theme back to the front of investors' minds.
While earnings are certainly getting a bump from the corporate tax cuts, lofty expectations are due to more than just that. Economic optimism in general also pushed Q1 expectations to levels rarely seen.
Group-think has likely led a dramatic rebound in soft, survey-based data, creating a large divergence from hard data. Whether or not global economic growth is cresting or rolling over, dampening expectations are in order. We expect higher volatility to continue across equities, while U.S. Treasuries remain in 'wait and see mode' for realized inflation growth. All in all, the VIX and MOVE will remain disconnected.
The New York Fed miscalculates its new LIBOR replacement, SOFR.
Tax Freedom Day is the day of the year when workers have effectively worked enough to pay their taxes for the year and can begin making money for themselves. In 2018 Tax Freedom Day is April 19.
A look at the April 13, 2018 CoT report.
Today's topics include the good side of volatility, challenging modern portfolio theory, the participation rate, Canada's pipeline problem, deficits, stock buybacks, Kashkari warming up to rate hikes and the blockchain.