Head of Macroeconomic Research
Summary: Our leading indicator US credit impulse is running at its highest level since the end of 2017, at 1.8% of GDP. In our view, the strong flow of new credit in the economy largely explains recent positive US data and may drive away the specter of recession, at least in the short term.
In this edition, we focus on our favorite macro gauge, credit impulse. Our leading indicator for the United States stands at its highest level since the end of 2017, at 1.8% of GDP. The positive trend in credit is also visible in demand for C&I loans which has been solid over the past quarters, reaching a peak at 9.3% YoY in Q1 2019.
Considering the United States in in late cycle and clearly not immune to the negative consequences of the trade war, the economy is rather resilient. In our view, it is at least partially the reflection of positive inflow of new credit in the economy over the past quarters.
The US surprise economic index is back in positive territory, close to levels previously reached in early 2018. On the top of that, the most recent economic data confirm the picture is far from being gloomy. Housing data rebounded in August, with positive surprise for building permits and housing starts, and US consumer spending are strong, probably due to mortgage refinancing in a lower rate environment. It seems that US households are already adjusting to Fed easing, which may drive away the specter of recession, at least in the short term.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
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