Inflation

[farmerge]

given Japan is now the clear No. 1 international holder of US Treasuries ( despite some selling to save the yen ) , yes i agree Japan might the crow in the coal-mine ( won't give you much warning of methane , but you will sure notice it is dead )

Bill Evans ? well it is easy to look good in the current crop of high-profile Australian economic commentators/professors/gurus

so yeah he is OK but did prefer some of the more provocative ones seen in the re-2020 era who would lash out with searing barbs where they thought it was needed

Seems to me being a touch cynical that those who could and perhaps should be mouthing off are sitting very comfortably in the back row reading comics of some description, instead of asking the hard questions.

 

[divs4ever]

Seems to me being a touch cynical that those who could and perhaps should be mouthing off are sitting very comfortably in the back row reading comics of some description, instead of asking the hard questions.

those with the 'hard questions' might have been cancelled , we saw a trend like that during the pandemic ( i see some independent/alternative journalists are now deliberately uninvited from press conferences , and other events only pre-arranged questions are taken )

( maybe they are writing internet blogs now )

 

[moXJO]

Bill Evans, Westpac Economist, has a good history for getting interest rates right. He is a bit of a guru.

He is predicting 4.1% by May then dropping to 2.35% by March 2025. (Source: Interview on ABC radio this morning that I listened to on the way to work).

I think a few of us are thinking in the same line. In the modern low growth economic world, interest rates can't stay high for too long.

This just means he most likely thinks we will be in recession by then.

 

[Knobby22]

This just means he most likely thinks we will be in recession by then.

In effect, so we will need a mildly stimulating interest rate setting to use his words. He does say that the further 3 interest rate rises will be needed though. If they don't occur we will have elevated interest rates for longer.

I like Bill Evans, he has gone against the pack a few times and has been correct more times than not.

 

[CityIndex]

US data may be showing a trend of beating expectations, but the latest Australian inflation and GDP data for Q4 printed softer than expected.

GDP Growth Rate (QoQ): 0.5% (exp 0.8%)
Monthly CPI Indicator (JAN) 7.4% (exp 8%)

The initial reaction sees AUD/USD testing a break below the key 0.6700 level, while the ASX200 has pared some of today’s losses. All trading carries risk, but it will be interesting to see if the market can sustain this speculation for a lower terminal RBA rate.

 

[over9k]

Fixed income is repricing basically everything now, not just here in AU.

 

[frugal.rock]

I like Bill Evans, he has gone against the pack a few times and has been correct more times than not.

Me too, old school. Wish we heard more from him.

Last I heard out of him he was warning business about pinching staff and over zealous charging price gouging

 

[over9k]

U.K was 11.0 vs 10.8 estimated or something like that last results too.

Europe continues to take it in the ass.

 

[farmerge]

those with the 'hard questions' might have been cancelled , we saw a trend like that during the pandemic ( i see some independent/alternative journalists are now deliberately uninvited from press conferences , and other events only pre-arranged questions are taken )

( maybe they are writing internet blogs now )

Sad but more thn likely the case.

 

[divs4ever]

Global Depression By 2025, Caused By Interest Rates & Inflation: Simon Hunt

https://www.zerohedge.com/news/2023...ble-digit-interest-rates-inflation-simon-hunt

at last , somebody actually vocalizing the D-word

 

[over9k]

Peak's probably faaaaaairly close, it's the peak then dropoff i disagree with.

I think it'll be a bounce & then plateau.

I don't see why AU would be any different

 

[waterbottle]

The NDX has been anaemic. Sideways action for the past week.
Meanwhile Nvda came out with a shocker - they're planning to issue $10bn in equities. Why?
Euro inflation still high.
Canadian and Aus GDP stalling.
US PMI in at 47.7, now the 4th month of contraction.
China PMI up to 52.1, keeping in mind this was when covid zero was abandoned, so not necessarily sustainable.
Baltic dry is off its recent lows but still relatively low at 990.

Bond markets approaching 4% on 10 year and pricing in a peak at 6 months of 5.15%. Meanwhile you have Fed members now calling for higher rates.

 

[moXJO]

I briefly saw something on US register sales dropping something like 45%.
I've heard from people that really analysed the US data saying that it's "on trend for recession".

I'm in two minds about recent data.
Mainly for the fact that the lockdowns created a surge. I'm not sure if it's been taken into account, or just used by bears as a "look at this" data point. It must have skewed figures.

 

[waterbottle]

I briefly saw something on US register sales dropping something like 45%.
I've heard from people that really analysed the US data saying that it's "on trend for recession".

I'm in two minds about recent data.
Mainly for the fact that the lockdowns created a surge. I'm not sure if it's been taken into account, or just used by bears as a "look at this" data point. It must have skewed figures.

Do you mean the China post-lockdown surge?
I would think the surge, if any, would be as long-lived as any other country's surge.

 

[moXJO]

Do you mean the China post-lockdown surge?
I would think the surge, if any, would be as long-lived as any other country's surge.

I mean the "consumer surge" both during and just after lockdowns.

 

[Dona Ferentes]

​

Global Depression By 2025, Caused By Interest Rates & Inflation -
at last , somebody actually vocalizing the D-word

And from an investment manager who is not in need of hyperbole

December 2022 half-year review by the Portfolio Manager

The driving force across financial markets for the past 18-months, has been the reappearance of worryingly high levels of inflation throughout developed world economies. Having spent the decade between the global financial crisis and the pandemic dealing with inflation that was too low, central bankers have, with very little warning, been presented with the opposite problem. At stake in confronting this is not just the mundane sounding problem of ‘maintaining price stability’, but the hard-won inflation fighting credibility of central banks themselves...

Having initially been too slow to respond during the latter part of 2021, policy makers spent most of 2022 trying to get out ahead of the problem. The result was one of the fastest policy tightening cycles on record. From a financial markets’ perspective, most of the pain from this was felt during the first half of calendar 2022. From the end of December 2021 to the end of June 2022, global equity and bond markets fell considerably - in US$ terms, by 20.2% and 15.6% respectively. What was striking about these falls was both their magnitude, and the fact that both asset classes recorded such steep falls at the same time. Conventional asset management theory typically seeks to create portfolios that combine both asset classes, under the assumption that they rarely move in the same direction at the same time. Sadly, holding bonds and shares together during the first half of 2022 greatly amplified investment risk instead of ameliorating it...

Turning to the December half of 2022, and the 6-month period of our review, what is noteworthy is that, by and large, market forces had normalised. That might seem an odd thing to say with inflation rates near double digits in many countries, central banks continuing to tighten policy, and a lot of hyperbole around this from market commentators. However, by the middle of 2022, most of the painful adjustments that central banks needed to deliver were done, both in terms of the actual tightening of monetary policy, and in terms of setting the markets expectations around the relatively modest amounts of tightening that was still to come. It is true that the investment landscape we are confronted with today looks very different to the one we have been used to for many years: in the US, short term interest rates have rarely been much above zero for the past 14 years, yet today they sit at 4.5%. Nevertheless, for the forward-looking market, by July of 2022 the necessary adjustment to this ‘new normal’ was largely complete. Over the December half-year period, financial markets were largely range-bound, a feature of the fact that while we don’t know exactly when the current tightening cycle will end, the finish line is now clearly in sight. The arguments today are whether the US Fed is going to raise interest rates by a final 0.25% or 0.5%, not whether there is a further 2% or 4% of tightening to come. In US$ terms, global share markets eked out a 2.3% gain during the December half, while global bond markets fell 1.6%. Most major currencies were also little changed against the US$ over the period, as were key commodities such as Oil, Gold, and Copper (a notable exception to this was Iron Ore, which rose by 15.7% over the period). Indeed, given the volatility of asset classes like Oil and global share markets, what is most striking is how little prices moved over a 6-month window...

Outlook
Looking ahead, to say that market forces have normalised again is not to say that there is any certainty about the outlook, or a consensus on where we end up. Rather, it just means that the daily arm-wrestle between the market optimists and pessimists is now more evenly balanced. Assessing what is known today, it is likely that rates of inflation have peaked, and thus we are drawing to the end of the current monetary policy tightening cycle in most rich-world countries. We also know that it is likely, but not certain, that key economies like the US and Europe will endure a recession sometime during 2023. Finally, there is the recent ending of China’s “zero-covid” policy and its reopening to the world, a development that is likely to boost global demand and growth. The optimists see all those facts and divine a “soft landing” ahead, perhaps even the avoidance of a recession, while contending that falling rates of inflation and economic growth will provide policy makers scope to cut interest rates later this year, boosting asset prices once again. The pessimists fret that the market has not yet appreciated the depth to the falls in company earnings that lie ahead, while arguing that it is far too soon for central banks to turn around and start cutting interest rates once more.

Finally, while a reopening of China will undoubtedly boost aggregate global demand, whether this is a good thing, or a bad thing, remains to be seen at time when policy makers are frantically trying to get inflation back under control. Indeed, given the precarious situation Europe faces in terms of its energy supplies, the reappearance of considerable Chinse natural gas demand should be a cause for concern.

There are thus two healthy and competing narratives about the direction of travel for the year ahead. As ever, we see little utility in trying to predict which will prevail in the near-term. That said, if we had to pick a camp, it does seem premature to us to assume the Fed will pivot to cutting interest rates again this year. Having initially been behind the curve, US policy makers have been at pains to highlight that they see more work to be done before inflation is back under control, and that they are likely to err on the side of caution until they have clearly won.

Irrespective of which way the near-term plays out, however, we must confess to being more optimistic about the longer-term outlook than we have been for some time. Following a large sell-off in markets, and a large lift in interest rates, longer-term return expectations across most assets classes have improved considerably. At the end of December 2021, global share markets traded on a price to earnings (P/E) ratio of 19.2 times, while a ten-year US government bond yielded a paltry 1.5%. By the end of 2022, global share markets were trading on a P/E ratio of 15 times, while ten-year US bond yields had reached 3.9%. To our mind that represents a very healthy resetting in the market, and a much more constructive backdrop to be investing from.

- Miles Staude GVF

 

[DannyB0000]

View attachment 153778

U.K was 11.0 vs 10.8 estimated or something like that last results too.

Europe continues to take it in the ass.

UK inflation came in at 17.1%, another record high for that country.

 

[over9k]

I mean the "consumer surge" both during and just after lockdowns.

This. The question is where the turning point is. Perception is reality here - once people get nervous, they stop spending, so things then go south.

Are they nervous yet or are millennials too addicted to their spending habits?

 

[mullokintyre]

This. The question is where the turning point is. Perception is reality here - once people get nervous, they stop spending, so things then go south.

Are they nervous yet or are millennials too addicted to their spending habits?

I wonder how many of the millenials are affected by mortgage rates?
How many of them are paying of a house versus just permanently renting?
For those renting, perhaps still spending like there is no tomorrow is the new norm.
Mick

 

[qldfrog]

UK inflation came in at 17.1%, another record high for that country.

They probably are more honest, there remains in the Brits a left over of ethics which was never there in the US..or here