Macro Digest: Inflation is here - ignore at your peril Macro Digest: Inflation is here - ignore at your peril Macro Digest: Inflation is here - ignore at your peril

Macro Digest: Inflation is here - ignore at your peril

Macro
Steen Jakobsen

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
Dr. Copper vs. China Credit Impulse – 9 months forward. Source: Bloomberg
Dr. Copper vs. Container Freight cost. Source: Bloomberg

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

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)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992