The answer, of course, depends on how soon inflation shows convincing signs of behaving. There are hints that we’re now in the early phase of post-peak inflation. Today’s update on consumer price inflation for November will be a reality check, which in turn will factor into the Federal Reserve’s monetary policy decision at tomorrow’s FOMC meeting announcement. Meantime, markets are cautiously optimistic that inflation has peaked, but the outlook beyond this binary view remains murky at best.
Macro Briefing: 13 December 2022
* FTX founder Sam Bankman-Fried arrested in Bahamas
* Binance, world’s largest crypto exchange, halts withdrawals of stablecoin USDC
* China challenges US chip curbs at WTO, charging ‘trade protectionism’
* India and China troops clash at disputed mountain border
* European Union plans to tax imports based on greenhouse gas emissions
* China delays closely watched economic policy meeting due to Covid spike
* Keystone pipeline leak is now biggest oil spill in US since 2010
* US consumers lower 1-year inflation expectations via NY Fed survey
* German investor sentiment continues to recover in December
* US 10yr Treasury yield trades near recent highs ahead of Fed meeting:
Inflation And Growth Worries Weighed On Markets Last Week
Nearly all components of the major asset classes fell last week, based on a set of proxy ETFs. Real estate shares ex-US were the exception.
Macro Briefing: 12 December 2022
* Slowing growth now tops inflation as main concern for markets
* Treasury Sec. Yellen is “hopeful” that inflation has peaked
* Breakthrough reported in fusion energy by US scientists
* World will get more power from solar vs. coal in 3 years, IEA predicts
* This week’s Fed meeting will be closely watched for signals on rates outlook
* China scraps virus-tracking app as part of dismantling of zero-Covid policy
* China announces first delivery of its new domestically produced passenger jet
* Investors are increasingly inclined to expect a soft landing for US economy
* US consumer sentiment rises in December but remains near historical lows:
Book Bits: 10 December 2022
Ray Dalio
Summary via publisher (Avid Reader Press/Simon & Schuster)
Ray Dalio, the legendary investor and #1 New York Times bestselling author of Principles—whose books have sold more than five million copies worldwide—shares his unique template for how debt crises work and principles for dealing with them well. This template allowed his firm, Bridgewater Associates, to anticipate 2008’s events and navigate them well while others struggled badly. As he explained in his #1 New York Times bestseller Principles, Ray Dalio believes that most everything happens over and over again through time so that by studying patterns one can understand the cause-effect relationships behind events and develop principles for dealing with them well. In this three-part research series, he does just that for big debt crises and shares his template in the hopes of reducing the chances of big debt crises happening and helping them be better managed in the future.
Research Review | 9 Dec 2022 | Valuation Analysis
Preference for dividends and stock returns around the world
Allaudeen Hameed (National University of Singapore), et al.
November 2022
We find strong international evidence favoring dividend payout as a salient stock characteristic affecting expected stock returns. We find that dividend-paying stocks outperform non-payers by 0.54% per month in 44 countries, adjusting for exposures to global and regional risk factors. The majority of the dividend premium is earned during the ex-dividend months. The dividend premium is higher following bad market states and co-varies across countries. Dividend payers’ outperformance is stronger in countries with poor governance but is unrelated to local tax rates on dividends. The evidence emphasizes the importance of (time-varying) preference for dividends in driving average stock returns and global return comovement.
Macro Briefing: 9 December 2022
* Inverted yield curves signal high odds of US recession
* US mortgage rates slide for a fourth week
* Turkey blocking halting flow of 600,000 bpd of oil
* China appears to be under-reporting Covid cases and deaths
* China annual inflation drops to 8-month low in November
* US regulators sue to block Microsoft’s acquisition of Activision Blizzard
* Meta battles US government over $300 million virtual-reality acquisition
* UK will face some of the worst strikes in at least a decade
* US jobless claims rise vs. year-ago level for first time since March 2021:
Introducing The US Inflation Trend Chartbook
Inflation is easing, or so recent data show. The debate is centered on how fast and how far pricing pressure will slide — or if the recent easing is a head fake. In other words, it’s the perfect time to launch a resource that summarizes and updates several of the key inflation indicators that deserve close attention on a monthly basis: The US Inflation Trend Chartbook.
Macro Briefing: 8 December 2022
* Will China’s easing of zero-Covid rules boost its economy?
* The threat of soaring infections lurks as China eases zero-Covid rules
* Chinese exports slide at steepest rate in more than two years
* Attacks on US electricity grid are rising
* German police arrest 25 suspects in plot to overthrow government
* US housing market is in recession, according to market data
* US home prices set to fall in 2023–first annual drop in a decade, Redfin predicts
* US consumer credit continues rising at solid pace in October
* Stocks tend to rise after the end of Fed rate-hiking cycles:
Don’t Underestimate Inflation Threat To Fed’s Credibility
Inflation appears to be rolling over and markets are starting to consider the possibility that the Federal Reserve’s hawkish monetary policy will soon start to ease. But the critical question of how quickly inflation pressure softens leaves more than a trivial amount of uncertainty to ponder.