Macro Digest: Inflation is here - ignore at your peril
Chief Investment Officer
Summary: China will lead world in 2021 - our credit impulse is clear. A steep increase in activity is expected. The market has no price discovery, hence no "real inflation" information. The measured financial market inflation will come late and seriously lagged.
I feel strongly established macro analysts are looking at macro drivers the wrong way. The financial market operates under no price discovery. The logical conclusion to that is that any financial derivates information has zero value!
The inflation gauges like 5y5y swap and other inflation links are invalid, similar to any analyst using value investment based on psychical asset world. Global stocks today are 80% immaterial value + 20% ESG narrative. Similar inflation today is 80% deficits in supply-demand lines and 20% last mile costs which is exploding as we speak. (@Peter Garnry will publish detail analysis of last mile today – he sees reporting of 60% increase in last mile cost, which of course sits in excess of even the stellar YoY increase these platforms has done in the COVID19 crisis).
This leads me to this conclusion:
- Market with no price discovery, hence no “real inflation” information. In the real world though Dr. Copper is breaking 2017 high + cost of containers (long haul) + Last mile cost (delivery) is breaking hard higher.
- The measured inflation in the financial market will come late and seriously lagged.
- Keep watching for marginal changes in FED and fiscal spend and you risk losing sight of what is really going on: Real economy inflation and disrupted global supply chains plus massive underinvestment in anything from fossils oil and gas, shipping to mining.
Two charts in this batch:
- Dr. Copper vs. China Credit Impulse – 9 months forward
- Dr. Copper vs. Container Freight cost
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)