US consumer inflation eased in October, posting a softer-than-expected increase and spurring fresh expectations that pricing pressure has peaked. Even if that’s true, inflation still looks set to remain high and the Federal Reserve remains on track to continue raising interest rates, perhaps at a slower pace than recently forecast. But in the wake of yesterday’s report, there’s a new reason to think that the inflation surge has crested.
Macro Briefing: 11 November 2022
* US Senate control still unclear as GOP edges toward retaking House
* Russia retreats from key city in southern Ukraine
* Softer US inflation report for October eases Covid measures as new cases surge
* US mortgage rates rebound above 7%
* Another warning for US housing from the largest home builder
* UK economy fell 0.2% in Q3, hinting at start of recession
* US jobless claims edge higher but remain near lowest in decades
* US consumer inflation slows more than forecast in October:
Can The Fed Tame Inflation Or Is It Different This Time?
A widely discussed criticism of the Federal Reserve is that the central bank was asleep at the switch last year, when it waited too long to begin tightening monetary policy to nip emerging inflation in the bud. The critique implies that adopting a more hawkish policy earlier would have spared the US from the high inflation that now stalks the economy. But a review of other central banks that followed that script suggests otherwise.
Macro Briefing: 10 November 2022
* Hurricane Nicole weakens to tropical storm over east-central Florida
* Ukraine peace talks still unlikely as Russia retreats from key position
* Binance abandons FTX rescue, leaving crypto exchange on brink of collapse
* US 3mo-10yr Treasury yield curve stays negative, returning to 2-1/2 year low:
US debt ceiling in focus as Republicans looks set to take over the House. “If Republicans win the House and Democrats retain the Senate, we envision an emboldened GOP calling for spending cuts as a pre-condition for agreement to raising the debt ceiling,” say Anna Wong and Andrew Husby of Bloomberg Economics. “Brinkmanship on that debate could see borrowing costs rise, tipping the economy from a short and mild recession next year into something more damaging.”
High Dividend Yield Still Leader For US Factor Returns In 2022
The stock market’s post-election performance starts today. From an equity-risk factor perspective, the horse race begins with high dividend yield in the pole position for year-to-date results, based on a set of ETFs through Tuesday’s close (Nov. 8).
Macro Briefing: 9 November 2022
* Dems perform better than expected but control of Congress still unclear
* European leaders announce funds to help poor nations with climate change.
* China’s inflation shows signs of easing in October
* China’s ‘Zero-Covid’ guessing game is all about one man: President Xi
* Some investors on Wall Street bet Fed funds rate could rise to 6%
* US inflation expected to cool only slightly in Thursday’s October report
* Binance, world’s largest cryptocurrency firm, agrees to buy rival FTX
* Meta is laying off 13% of staff, or more than 11,000 employees
* US small business sentiment remains depressed in October:
Hedging Interest Rate Risk With Real And Nominal Treasury Yields
Update: the analysis below implies that summing two Treasury yields allows you to earn the summed yield. In fact, that’s not possible. Rather, the point of the article is that summing the two yields offers a timing signal for identifying relatively high payout rates for a strategy of holding a 50-50 mix of TIPS and conventional Treasuries. Apologies for any confusion. –JP
The recent rise in real yields for inflation-indexed Treasuries (TIPS) looks compelling for locking in relatively attractive payout rates, but the usual risks with bonds still applies. That inspires looking at a somewhat unorthodox strategy of holding TIPS and conventional Treasuries as a hedging strategy.
Macro Briefing: 8 November 2022
* Florida’s east coast braces for Tropical Storm Nicole
* Republicans expecting to win back power in Congress after today’s elections
* UN chief outlines stark choice for nations at COP27 climate summit
* China’s Covid controls are still creating headwinds for the economy
* Covid continues to take a toll on US workforce
* Soft landing is still possible for US economy, advises Goldman Sachs
* Consumer confidence in the housing market falls to new low
* US stocks “have always gained a year after midterms” since 1950: LPL Research:
Rebound In Global Markets Turned Mixed Last Week
The recent rally in global markets thinned out last week as commodities and foreign stocks rose while US assets retreated, based on a set of ETF proxies.
Macro Briefing: 7 November 2022
* White House national security adviser held talks with top Russia aides
* Republicans look set to retake House and maybe Senate in Tuesday’s vote
* Florida prepares for a direct hit from Tropical Storm Nicole this week
* China’s exports and imports unexpectedly fell in October
* Goldman Sachs predicts China is ‘months away’ from reopening
* US oil production roughly flat as fracking-related output slows
* Apple’s iPhone shipments delayed due to China Covid lockdown
* Meta reportedly set to announce large-scale layoffs
* US payrolls rose 261k in October, a solid gain but slowest in 22 months:
