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.
2024: The wasted year
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Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
