Tracking the US’s Labour Market Recovery

The US labour market has pockets of tightness. However, it’s unlikely we’ll see rapidly rising household inflation-expectations until we see higher low-skilled wage growth and rising ex-transfer incomes Our indicators show that at this relatively early stage in the...

Adding Back Central Bank Ambiguity

Central banks are adding more ambiguity back into their reaction functions. This points to higher global rate volatility After years of repression, rate volatility is beginning to rise. This is not only a reflection of greater macro-economic volatility, but –...

It’s the Most Wonder-bull Time of the Year

Reflation narratives are becoming consensus, but there is little reason to be contrarian for contrarian’s sake Strategists are flooding client inboxes with year-ahead forecasts and themes, and it’s striking how similar the arguments are. The common conclusion from...

Elections Come and Go

The US presidential election on Tuesday is currently the number one event risk for US equities.  But investors should focus on two more important underlying themes: positioning and reflation. Markets haven’t whole-heartedly embraced the reflation trade as money...

What They Will Do vs What They Should Do

Governments are becoming very concerned about the resurgence in virus cases seen since summer. In context, the rise in cases should not be too alarming. More testing means more cases will be found, and the relatively high false positive rate for the most common tests...

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....

Yields suggest Monetary policy is close to its limits

This post was taken from our weekly report, dated October 15, 2019. In the last month yields have since then done a round trip, falling and then rising again, but crucially term premium (TP) has not fallen. It was TP’s relentless fall through 2019 that meant the...