Euro to Remain Better Supported

Nov 4, 2016 | European Economy

(from our Tactical of 18th October 2016) One currency that may buck the trend and remain supported against the dollar is the euro.  Although tapering from the ECB does not look imminent, core inflation may start surprising to the upside in the eurozone.  The chart...

Real Yields Wildly Mispriced Given Stagflation Light

Oct 7, 2016 | US Economy

The US now has the worst combination of outcomes, poor growth and rising inflation.  Bond yields are now the most negative they have been in almost forty years.  Only in the 1970s during stagflationary episodes were real yields this negative.    We don’t see a high...

Bond Yields Diverge from Inflation

Aug 24, 2016 | US Economy

Bond yields are currently diverging in a very big way from economic fundamentals, and our valuation tools point to a rise in yields.  Normally, there is a very tight correlation between the change in the ISM prices paid survey and the changes in the 10 year yield. ...

Inflation Alive and Well in the US

Mar 2, 2016 | US Economy

We have focused on the theme of the misplaced fear of deflation at Variant Perception frequently over the past 18 months.  At several points, markets and commentators seem to have become preoccupied with a belief that growth-destroying deflation was imminent. Using...

ECB QE: Inflation to Start Surprising to the Upside

Apr 24, 2015 | European Economy, Monetary Policy

The sharp devaluation in the euro and the rapid acceleration in economic activity will mean short-term inflation dynamics in the eurozone will soon start surprising to the upside.  In this context it is important to remember that the only justification for ECB...

US Inflation and Wages Continue to Turn Up

Jul 25, 2014 | US Economy

The key message from our leading indicators is that US inflation and wages continue to turn up.  This was one of our core themes for 2014 we discussed in December last year and is bearing out.  Core inflation and headline inflation are positive, while wages are...

Deflation not a danger, modest inflation with wage growth ahead

Jun 9, 2014 | Featured, Leading Indicators

While markets are fixated on the threat of deflation and “lowflation” (a dumb word if ever there was one), our leading indicators are pointing towards modest core inflation ahead. Furthermore, our leading headline inflation indicator is rising moderately as well. We...

UK inflation to start rising again: linkers to outperform

Jan 20, 2014 | Featured, UK

UK inflation last week came back to the BoE’s target for the first time since 2009.  This should most certainly be a boon for consumers whose average real incomes have been negative for several years.  However, our UK Future Inflation Index, which gives a reasonable 6...

Inflation to hold UK recovery back

Nov 11, 2013 | European Economy, Featured

There are some notable reasons for near-term reasons for optimism in the UK.  The housing market seems to be picking up, industrial production growth is looking up together with PMI data and the equity market has done well. All these are real and significant signs of...