We have recently proposed two macro theses that are starting to unfold, and which might complicate the picture for the Federal Reserve going into the second half of the year. First, the global inflationary impulse and the goods side of inflation have bottomed and are on the rise…

The US economy has clearly been in a league of its own in the post-pandemic era as extraordinary stimulus packages on both the fiscal and monetary side boosted households balance sheets. The first four months of the year have underlined the exceptional position of the US economy…

Friday's weaker than expected nonfarm payrolls report took markets by surprise. However, zooming out a bit, the current strength period of the US labor market is historically unusual and makes employment prone for a mean-reversion. The labor market is currently in its fifth…

And here it is. The US jobs report disappointing expectations across the board with the unemployment rate rising, hiring growth moderating and average hourly earnings increasing by less than anticipated. The US added 175 thousand people to its workforce in April, a step down from…

Markets dovish repricing of the ECB vs. Fed policy path has been going on for a year now as Europe continued to battle weak growth prospects and moderating price grow, while the US enjoyed above trend inflation and economic activity. This culminated into the policy change…

Economists expect a step down in job growth from around 300k in March to 240k in April. Which is still a solid number and wouldn’t in any sense highlight a weak labor market. That is very much at odds with the recent weakening of every possible leading employment indicator. Going…

The seeming intervention of Japan on the FX markets has shifted attention on the Chinese central bank and has raised the risk of a potential devaluation of the yuan. However, the main issue China is facing is not on the supply side and can therefore hardly be combated by a weaker…

The conclusion of the week so far has been that US inflation remains sticky while US exceptionalism on the growth side is waning. The upside surprises on retail sales, industrial production, inflation, durable goods did not culminate into a strong GDP print closing out Q1. The US…

April has seen a broad based sector wide improvement in the German growth outlook, confirmed by all major surveys. German macro has now finally stopped being a burden for the common currency as economic momentum is starting to pick up. One thing to note; the recent improvement in…

The US economy has defied all expectations of a major slowdown and forecasting a recession has been a lost cause for the past few months. The overperformance comes against the backdrop of strong consumer spending, a tight labor markets and the expansion of fiscal policy. The…

Going into the year, the broad expectation was for US growth momentum and inflation to slow and to pave the way for aggressive rate cuts by the Federal Reserve. Neither of those has materialized and investors are coming to terms with the higher for longer regime. Adjusting to…

The pandemic and consequently the introduced fiscal stimulus measures have unleashed a debt-driven consumption boom in the United States that is still ongoing. It is hard to overstate by just how much the governments obligations have risen over the past four years, even in the…

Investors are coming to terms with the fact that the Federal Reserve might only cut rates one or two times this year. This adjustment is also complicated by the recent developments in the Middle East and central banks outside the US laying the groundwork for easing policy. All of…

German macro has finally stopped being a burden for the common currency as economic momentum starts picking up. While still not strong enough to be a positive catalyst for moving the euro higher, markets will now focus solely on US developments to determine the path of EUR/USD.…

US Treasury yields on the long end have risen to their highest level since November, dampening risk appetite and putting the S&P 500 on track for its third consecutive weekly decline. At the same time, the global commodity index has risen by 11% so far this year while…

Is the next move a hike?

Our proprietary global inflation impulse index has surged back, registering an aggregate Z-score of almost 5. This indicates a substantial positive inflation impulse from each of our five key subcomponents, often resulting in US inflation levels…

Thoughts?

Chart Boris Kovacevic

The latest string of hotter than expected inflation prints just got longer with the consumer price index surprising once again to the upside in March, ending the first quarter with a high level of uncertainty for investors and the US central bank. Going into the year, investors…