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....

G3 Central Banks set Tone

The divergence in monetary policy across developed markets since the beginning of 2018 is starting to breakdown as Fed and ECB easing makes it increasingly difficult for the hawkish hold-outs to tighten. Above-target inflation in 2018/early 2019 provided cover for the...

Fed Easing sees Defensive Stocks come out on Top

Over the last five Fed easing cycles consumer staples, healthcare and energy provide the highest average total return above the index one year after the Fed’s first cut. This is not too surprising given that the Fed started cutting as recessions loomed in 2007 and...

Sky-High Corn Price adds to Inflation Pressures

With the US and Chinese trade positions hardening, market sentiment has swung into risk-off mode with oil sliding, equities weak and USTs bid. Moreover, this has further fuelled speculation that the next move at the Fed will be a cut, with the OIS market now pricing...

Complacency sees Vol Sellers Return in Numbers

Short volatility positions are back at extreme levels once again, showing the growth of complacency among market participants. The more dovish than expected Fed has allowed volatility sellers to become more emboldened, and speculative VIX future positions are back up...

Fig Leaves For Raising Interest Rates

Central banks are increasingly altering the perception of their reaction functions to allow tighter (or less easy) monetary policy. At the ECB, discussion of so-called “supercore” inflation has re-emerged. This consists of the components of the HICP basket that have a...

BoJ Underscores Support for USDJPY

Data and policy continue to line up for a weaker JPY. Kuroda has re-iterated his commitment to stimulus, stating, “it’s premature to discuss in an exact way about exit strategy”. Kuroda continues his battle against the deflation mindset; and, as the top chart shows,...