Economy
Investors should think probabilistically about the economy and financial markets. In the face of non-linear effects, the range of possible outcomes can be very large. A systematic application of Bayes’ rule can help improve decision-making.
Numerous divergences have opened up between global risk assets and global business cycle variables. These gaps are unsustainable, and odds are that the recoupling will occur to the downside with risk assets selling off.
As expected, the US CPI release shows the monthly headline and core inflation gauges were both unchanged at 0.2% m/m in July. Notably, annualized monthly core inflation fell below 2% for the second consecutive month. Similarly, the annual change in core CPI…
On Wednesday, President Joe Biden announced that a new ban on some US investment into China’s quantum computing, advanced chips and artificial intelligence sectors will come into force next year. This latest escalation is consistent with our Geopolitical…
The rise in bond yields over the past few weeks has made some investors wonder whether US Treasurys and other government bonds really are a good hedge against recession. Could there be an environment in which the economy goes into recession but bond yields…
According to BCA Research’s Commodity & Energy Strategy service, gold’s appeal as a safe haven and store of value will increase as fiscal dominance overtakes monetary dominance at the Fed. Fitch’s downgrade of US debt from AAA to AA+ hit markets as the…
Some thoughts on this morning’s inflation number and implications for Treasury yields and TIPS.
China’s CPI and PPI inflation release for July indicates that deflationary pressures dominate the domestic economy. After remaining unchanged in June, consumer prices fell by 0.3% y/y. Meanwhile, the 4.4% y/y drop in producer prices fell below expectations of…
The Mexican peso is the best performing major currency so far this year, gaining 14% vis-à-vis the greenback over this period. Even during the latest bout of dollar strength since mid-July, MXN has weakened by the least among its peers. This follows an…
During the last economic expansion, a structurally overweight allocation to stocks was at least partially warranted by the idea that “There Is No Alternative” – or “T.I.N.A.” During the last expansion, very accommodative monetary policy significantly reduced…