The playing field is riddled with imperfect information in real time, long response lags, unclear relationships between economic and financial variables, and a hefty dose of uncertainty linked to behavioral risk. Throw in a high degree of geopolitical risk at the moment vis-a-vis the Ukraine crisis for good measure. Modeling how all this interacts in the months ahead for purposes of setting monetary policy is like trying to grasp all the possible moves in a game of chess.
Author Archives: James Picerno
Macro Briefing: 9 February 2022
* Germany’s chancellor says Russia would pay ‘very high price’ for Ukraine invasion
* Russia raises doubts about Ukraine crisis de-escalation efforts
* Supply chain disruptions to ease in 2H:2022, predicts shipping giant Maersk
* Ottawa’s protests inspire similar demonstrations beyond Canada’s borders
* US reports record trade deficit for 2021
* Nissan will end nearly all new gasoline engine development amid shift to electric
* Savers not expected to benefit from Fed rate hikes in near term
* Small US business owners say inflation is most important business problem
* US 10yr Treasury yield rises to 1.96%, highest since mid-2019:
Inflation Surge Continues To Defy Forecasts Of Peaking
Early on in the current run of accelerating inflation there were forecasts that the increase was “transitory.” Then the outlook shifted to estimates that the peak would top out but last longer than previously expected. Now the question is whether inflation’s run higher is on track to continue?
Macro Briefing: 8 February 2022
* Putin hints at possible thaw in Ukraine tensions after meeting France’s Macron
* Biden: Germany’s gas line from Russia won’t operate if Putin invades Ukraine
* Goldman’s head of commodities research says “We’re out of everything”
* Demand rising for dividend stocks amid outlook for slower growth, rising rates
* Hedging on US stocks at highest level in nearly two years
* Oil giant BP reports highest earnings in 8 years as commodity prices surge
* Meta is considering shutting down Facebook and Instagram in Europe
* Baltic Dry Index, a leading economic indicator, is close to lowest level in a year:
Emerging Markets Led Last Week’s Rebound In Global Stocks
Shares in emerging markets rallied for the first time in three weeks, posting the best weekly performance for the major asset classes through Friday’s close (Feb. 7), based on a set of ETFs.
Macro Briefing: 7 February 2022
* German Chancellor Scholz says Russia will pay high price if Ukraine invaded
* Biden to meet with German Chancellor Scholz today in White House
* Germany urged to ‘wake up’ to Ukraine-Russia threat
* French president Macron to meet Putin in effort to avert Ukraine war
* US labor shortages expected to continue through second half of 2022
* Gold has been relatively steady amid recently volatility in US dollar and bonds
* US set to unveil new Asia-Pacific economic strategy to counter China
* Germany’s industrial production declined unexpectedly in December
* Two January estimates of US private payrolls show sharply divergent results:
Book Bits: 5 February 2022
Rupert Russell
Review via Publishers Weekly
Documentary filmmaker and sociologist Russell debuts with a harrowing look at the disastrous consequences of financial speculation. Contending that recent political and social turmoil in Iraq, Ukraine, Venezuela, and other countries has been triggered by irrational price shocks that don’t correspond to actual issues of supply and demand, Russell details how small market movements are amplified and manipulated by hedge fund managers and commodities traders seeking to deliver consistent profits regardless of real-world conditions. Among a plethora of disturbing case studies, Russell describes how oil wealth generated by market speculation fueled corruption and then caused ruinous hyperinflation in Venezuela; explains how artificially low coffee prices, climate change, and agricultural debt led to a surge in migration from Guatemala toward the U.S.; notes that the terrorist organization al-Shabaab drove down cattle prices in Somalia during a 2010–2011 drought in order to compel desperate farmers to join their ranks; and contends that Western governments suspending “the rules of the game” to prop up their economies during the Covid-19 pandemic only underscores how much arbitrary control markets and prices have over the global economy.
Desperately Seeking Yield: 4 February 2022
The inverse relationship between prices and yields, if not quite a blessing, is at least useful. And so it’s been since our last update on trailing yields for the major asset classes via ETF proxies. As prices have fallen, some of the pain is offset by rising trailing yields.
Macro Briefing: 4 February 2022
* Leaders of Russia and China meet at Olympics in Beijing, denounce US pressure
* Global growth in January slowed “notably” in January via PMI survey data
* Bank of England lifted interest rates, again, to fight inflation
* ECB president Lagarde hints at faster policy tightening amid high inflation
* Meta (Facebook) loses $250 billion in market value amid weak earnings results
* Amazon shares soar on strong revenue gain in Q4
* Eurozone retail sales fell more than expected in December
* US jobless claims fell for a second week, hinting at softer Omicron blowback
* Factory orders in US fell 0.4% in December, in line with expectations
* US ISM Services Index continued to fall in January, reflecting slower growth:
Major Asset Classes | January 2022 | Risk Profile
After a stellar run higher, the Global Market Index’s risk-adjusted performance reversed in January, based on the trailing 3-year Sharpe ratio, a measure of return adjusted by volatility. The downturn was dramatic, but no less expected after the hefty increase in previous months. As noted in last month’s risk profile, “History suggests that upward spikes in GMI’s Sharpe ratio are quickly reversed, which implies that choppy market activity lies ahead.”