Red Flags Fly
Jobs Crumble
Bonds Wobble
Dollar May Tumble
Brace For Impact 🧵👇
Macro Pulse Update 15.07.2023, covering the following topics:
1️⃣ Macro events for the week
2️⃣ Bitcoin Buzz Indicator
3️⃣ Market overview
4️⃣ Key Economic Metrics
5️⃣ Shifting Asset Sentiments
1️⃣ Macro events for the week
2️⃣ Bitcoin Buzz Indicator
3️⃣ Market overview
Market update key insights:
US PPI rose just 0.1% in June, the smallest annual increase since Aug 2020, indicating disinflation
driven by 0.2% increase in services, while goods prices were unchanged
reflects diminishing impact of supply chain issues and slowing demand due to higher rates
Points to falling inflationary pressures
UK GDP contracted 0.1% in May, less than expected, influenced by bank holiday
Services remained flat with less impact from strikes vs previous month
Analysts expect potential downturn in H2 2023 due to higher rates slowing economy
Stock markets are all green
US stocks climbed with S&P 500 up 0.85%, Dow up 0.14%, Nasdaq up 1.58%
Asia-Pacific markets mostly rose led by Hong Kong's Hang Seng after 2.5% surge
Japan's Nikkei 225 rose 0.84%
4️⃣ Key Economic Metrics
Interest rates 🔴
Hawkish central bank positioning, declining global liquidity, and lingering high US inflation point to continued monetary policy tightening in major economies to combat inflationary pressures.
US inflation eased to 3% in June, the lowest in over 2 years, but still high enough to keep the Fed on course for more rate hikes as economic recovery remains ongoing and policy adjustments continue.
Hawkish rhetoric from Fed and ECB policymakers reinforces expectations of further interest rate hikes this month as central banks tighten policy.
Global liquidity has declined sharply recently per Marco's liquidity proxy (−$3.2T in 3 months) and static Bitcoin prices since mid-April, indicating tightening conditions.
Inflation 🟢
The lower-than-expected inflation helped stabilize the markets, though gains were modest as uncertainty remained around future rate hikes.
June CPI inflation was 3.0%, lower than expected 3.1% and down from May's 4.0%
This dip in inflation provided some relief to the markets
Markets showed a minor uptrend on the news - S&P and NASDAQ edged up, while Bitcoin also trended slightly upward
Jobs Data🔴
The latest jobs data raises red flags about the health of the labor market and broader economy, with suspicions that the numbers may be exaggerated (a conspiracy?) through revisions and omissions to further a political agenda.
June jobs report fell short of expectations, marking lowest job growth in years and rise in unemployment rate
Job figures consistently revised downward later, suggesting potential deliberate data manipulation
Job gains are concentrated in unproductive government roles, while productive private sector are stagnant
Alarming increase in multiple job holders and part-time workers hints at impending layoffs
Erosion of full-time jobs and stagnant wages worsen situation as some are pushed into gig work like DoorDash or disappear from statistics
Fed may exploit crisis to justify more rate hikes, risking further instability as economy nears recession
5️⃣ Shifting Asset Sentiments 🟡
The core sentiments seem to be shifting views on established markets like bonds, doubtfulness on the stability of the dollar, and uncertainties around the changing rules for money market funds.
Bond guru Jim Grant rang the alarm bells by calling out a potential once-in-a-generation bear market in bonds. He pinned the blame on the Fed's aggressive policies and the rocky economic landscape. His ominous warning serves as a wake-up call for diversification, as bonds may not be the safe bets they used to be.
Top asset managers think the mighty US dollar is headed for a fall. Their rationale - interest rates are close to peaking while the Fed's tightening could backfire on the economy. This outlook offers a glimmer of hope for investing in non-dollar assets, especially in emerging markets where currencies could gain some muscle against the greenback.
The SEC took another stab at fine-tuning money market fund rules to build a bigger buffer against panics. It's the third round of tweaks in 15 years. New safeguards like redemption fees are meant to boost resilience and transparency. But doubts remain on whether the costs outweigh the benefits for these funds which have been popular cash parking lots.
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