US Consumer Will not be Coming to the Economy’s Rescue

The latest print from the University of Michigan consumer sentiment survey has shown a fall of almost 12 points, the largest drop since 2008, and takes us back to 2016 levels. Unlike the last three recessions, which had seen consumer sentiment fall into each one...

Another Yield Curve Red Herring

After first inverting last year, the 3m10y yield curve recently re-inverted, prompting the usual slew of mechanical recession predictions. However, not all inversions are equal. The top-left chart shows that almost all of the YTD decline in 10y yields is from the fall...

ISM key for US economy, not Iran

Only a few weeks ago, top-of-mind risk for market participants was the trade war, according to BAML’s Global Fund Manager Survey. Now it is highly likely the list would be topped by tensions in the Middle East after the US assassination of the Iranian general, Qasem...

Autos will lag other rate-sensitive sectors

The auto and housing sectors are two parts of the economy that are highly sensitive to interest rate changes. In light of the Fed’s dovish pivot at the start of the year, culminating in 3x25bps of interest rate cuts, we would expect activity in both sectors to surge....

Dollar to come under growing pressure

Our view on the USD for 2019 was that it would face modest downwards pressure. The pressure has been modest, but it has been to the upside. Nonetheless, overall the dollar (DXY) has been in a tight range this year (~4.5%). Every attempt to the upside has been met by...

Intermarket Gauges suggest recession or risk-on

The S&P has been very resilient this year in the face of slowing growth, falling earnings and trade war uncertainty. However, underneath the surface, market rotations have been very bearish. Over the past year, high-yield credit has underperformed investment grade...

Momentum under fire as confidence softens

With consumer confidence measures released a couple of weeks ago, we have observed an interesting divergence between the University of Michigan consumer sentiment index and Conference Board consumer confidence index (top-left chart). When we plot the spread and...