Incoming economic data are missing expectations across a majority of developed economies, foreshadowing a shift to sub-par realized data changes. These transitions have not been kind to global equity markets. Notably, inflation changes are also falling back to one-year average growth rates.
Inflation across the globe has been slowing its pace of ascent while concerted economic growth abates. U.S. inflation expectations have become believers in the Fed's hope for inflation. Both U.S. inflation expectations and nominal yields will face headwinds into late spring, offering opportunities for those looking to re-establish long breakevens positioning.
Investors are looking for alternatives as rising currency hedging and dollar funding costs make U.S. credit markets less appealing.
Peter Forbes discusses his recent post titled: No Safe Haven from Rising Volatility.
Today's topics include CAPE, LIBOR, the Fed's inflation target, the Fed's dot plots, the yield curve, big companies dominating the economy and reversing Brexit.
None today
Bill issuance and repatriation are offering a potentially short-term boost to the Libor / OIS spread. The onus going forward will be on inflation rebounding and economic growth remaining stable to keep the Federal Reserve from driving the target rate above the neutral rate. Markets are revealing only modest concerns, but languishing inflation and continued tightening policy would very likely boost credit/funding risks.
While the median forecast for three hikes in 2018 remains unchanged in the latest Summary of Economic Projections, a close look at each dot shows how close the Fed was to projecting four hikes.
Softening trade rhetoric may be a catalyst for converging economic growth in the U.S. and Canada.
With just a few weeks to go until first-quarter reports start flowing in, the bar is as high now as it is during normal economic periods. If companies fail to keep up with analysts’ lofty expectations, the markets are likely to experience another bout of rising volatility.
Today's topics include the fight for bank deposits, volatility, deteriorating credit quality, measuring inflation, emerging market flows, speculators' hatred for the U.S. dollar and a new cryptocurrency.
HT @IvanTheK