Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Provide Comprehensive Analysis & Commentary

SAV Markets

SAV Markets aims to provide comprehensive analysis & commentary on foreign exchange and asset markets. The approach is multi asset as markets are typically interlinked. Cause and effect are always at work, even if those effects take time to manifest. As nothing is permanent we strive to get ahead of the curve in an ever changing world.

Cross Asset Strategy

<ul>
<li>Fixed Income markets have stabilised after the Fed including the relentless rise in short end (2Y) yields. Short term Bonds are not a sell</li>
<li>Equity markets have also stabilised with positive short term price action while there are too many bears</li>
<li>The USD has stabilised and showing early signs of a slip (ex USDJPY). Watch the price action</li>
</ul>


Fixed Income markets have stabilised after the Fed including the relentless rise in short end (2Y) yields. Short term Bonds are not a sell
Equity markets have also stabilised with positive short term price action while there are too many bears
The USD has stabilised and showing early signs of a slip (ex USDJPY). Watch the price action


Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Macroeconomics

<ul>
<li>Investors want greater clarity about the future path of US interest rates. The Fed missed the opportunity to provide this information this week, sowing the seeds for financial market volatility. </li>
<li>Choppy growth due to the omicron COVID-19 variant and high inflation stoke stagflation fears. The bond market is convinced that COVID-19 will not distract the Fed from tightening policy.</li>
<li>Many of today's equity investors have not experienced a Fed tightening cycle due to rising inflation, thereby rendering their hopes of another Fed Put as being unrealistic. </li>
</ul>


Investors want greater clarity about the future path of US interest rates. The Fed missed the opportunity to provide this information this week, sowing the seeds for financial market volatility. 
Choppy growth due to the omicron COVID-19 variant and high inflation stoke stagflation fears. The bond market is convinced that COVID-19 will not distract the Fed from tightening policy.
Many of today's equity investors have not experienced a Fed tightening cycle due to rising inflation, thereby rendering their hopes of another Fed Put as being unrealistic. 


Financial Markets Demand Greater Clarity from the Fed About the Future Path of Interest Rates

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

The US consumer price index (both headline and core) rose at an annualized pace of 10.8% MoM in June 2021. For 2Q (April-June) 2021, the core CPI increased at an annualized pace of 10%, while the headline CPI increased 9.2% (annualized) in 2Q 2021. We had predicted precisely this outcome on 12 June 2020 (13 months ago) in <a href="https://www.smartkarma.com/insights/labour-market-slack-remains-but-fomc-will-need-to-tighten-by-mid-2021" target="_blank" data-smartkarma-citation="insights:40185" rel="noopener">Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021</a> because inflation would rise markedly. While the FOMC has insisted that inflation is transitory, it actually began a stealth tightening in May 2021, engineering a month-on-month decline in the monetary base that month. CPI inflation is currently being under-estimated, because the Housing component is properly updated only half-yearly after a complete national survey of rentals and owners' equivalent rents (OER, the implicit rent that would be paid by homeowners were they to rent rather than own their home). The Case-Shiller 20-city housing price index was up 14.9% YoY in April 2021 (the latest data, released at end-June 2021), and this is bound to enter the CPI and PCE price index in 2H 2021. (Housing is considered an investment, not consumption, so rents and OER are the consumption portion; housing prices are not directly relevant to CPI, the cost of using housing -- rents -- are). Having risen just 2.6% YoY in June 2021, Housing is likely to rise much more sharply in 2H 2021, pushing up headline and core CPI (and also PCE, but less because of its lower weight). The labour market retains some sectoral slack in the hospitality and tourism-related sectors, but appropriately skilled labour is increasingly in short supply elsewhere in the economy.  Despite a high base from June 2020 (5% YoY), average weekly earnings (wages) were up 3.6% YoY in June 2021. Wage inflation will likely exceed 4% YoY in 3Q 2021, contributing additionally to inflationary pressure. St. Louis Fed President James Bullard (a non-voting member of the FOMC this year) has already called for tapering to begin (as "substantial progress" has already been made on the Fed's inflation and unemployment goals). While Fed Chair Powell insisted in his House testimony this week that tapering remains "a ways off", he told the Senate on the following day, "...of course we're not comfortable with" the fact that the reopening of the economy had "driven inflation well above 2%". The 27-28 July FOMC meeting will likely see more intense discussion of tapering, and we think formal (not merely stealth) tapering will be begin no later than the September meeting. We remain cautious about equities, although the strong recovery makes cyclicals and consumer cyclicals attractive.

The US consumer price index (both headline and core) rose at an annualized pace of 10.8% MoM in June 2021. For 2Q (April-June) 2021, the core CPI increased at an annualized pace of 10%, while the headline CPI increased 9.2% (annualized) in 2Q 2021. We had predicted precisely this outcome on 12 June 2020 (13 months ago) in Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021 because inflation would rise markedly. While the FOMC has insisted that inflation is transitory, it actually began a stealth tightening in May 2021, engineering a month-on-month decline in the monetary base that month. CPI inflation is currently being under-estimated, because the Housing component is properly updated only half-yearly after a complete national survey of rentals and owners' equivalent rents (OER, the implicit rent that would be paid by homeowners were they to rent rather than own their home). The Case-Shiller 20-city housing price index was up 14.9% YoY in April 2021 (the latest data, released at end-June 2021), and this is bound to enter the CPI and PCE price index in 2H 2021. (Housing is considered an investment, not consumption, so rents and OER are the consumption portion; housing prices are not directly relevant to CPI, the cost of using housing -- rents -- are). Having risen just 2.6% YoY in June 2021, Housing is likely to rise much more sharply in 2H 2021, pushing up headline and core CPI (and also PCE, but less because of its lower weight). The labour market retains some sectoral slack in the hospitality and tourism-related sectors, but appropriately skilled labour is increasingly in short supply elsewhere in the economy.  Despite a high base from June 2020 (5% YoY), average weekly earnings (wages) were up 3.6% YoY in June 2021. Wage inflation will likely exceed 4% YoY in 3Q 2021, contributing additionally to inflationary pressure. St. Louis Fed President James Bullard (a non-voting member of the FOMC this year) has already called for tapering to begin (as "substantial progress" has already been made on the Fed's inflation and unemployment goals). While Fed Chair Powell insisted in his House testimony this week that tapering remains "a ways off", he told the Senate on the following day, "...of course we're not comfortable with" the fact that the reopening of the economy had "driven inflation well above 2%". The 27-28 July FOMC meeting will likely see more intense discussion of tapering, and we think formal (not merely stealth) tapering will be begin no later than the September meeting. We remain cautious about equities, although the strong recovery makes cyclicals and consumer cyclicals attractive. 

US Wages Are Resurgent, Even if Markets Haven't Noticed; Keep Your Eye on Inflation

Technical Analysis

Chicago Board Options Exchange Volatility Index / Technical Analysis

Chicago Board Options Exchange Volatility Index

Regular readers will know that a useful comparison has been made about the rally in the Dow Jones since last years low with the rally seen from March 2009 to May 2010.A similar comparison has been made between the S&amp;P 500 / Bonds Ratio over the same periods - see <a href="https://www.smartkarma.com/insights/us-equities-time-to-get-defensive" target="_blank" data-smartkarma-citation="insights:51332" rel="noopener">US Equities: Time to Get Defensive</a>These comparisons have so far given good guidance about turning defensive on equities over the past month and bullish on Bonds.In a similar fashion, the chart below compares the trends in the VIX Index with the aftermath of the last crisis 11-12 years ago.The similarities in the levels at work are striking and warn of possible complacency in the market place that could lead to much higher levels of volatility than seems to be generally expected.

Regular readers will know that a useful comparison has been made about the rally in the Dow Jones since last years low with the rally seen from March 2009 to May 2010.A similar comparison has been made between the S&amp;P 500 / Bonds Ratio over the same periods - see US Equities: Time to Get DefensiveThese comparisons have so far given good guidance about turning defensive on equities over the past month and bullish on Bonds.In a similar fashion, the chart below compares the trends in the VIX Index with the aftermath of the last crisis 11-12 years ago.The similarities in the levels at work are striking and warn of possible complacency in the market place that could lead to much higher levels of volatility than seems to be generally expected.

The VIX Index has bounced off key levels over the past 24 hoursA close above 21.85%, if and when seen, would be an important break that would then argue for a test of at least 27% if not higher. None of what is suggested on this chart at the moment looks good for the S&amp;P 500

The VIX Index has bounced off key levels over the past 24 hoursA close above 21.85%, if and when seen, would be an important break that would then argue for a test of at least 27% if not higher. None of what is suggested on this chart at the moment looks good for the S&amp;P 500

United States

The VIX Index is a financial benchmark designed to be an up-to-the-minute market estimate of the expected volatility of the S&P 500® Index, and is calculated by using the midpoint of real-time S&P 500 Index (SPX) option bid/ask quotes.

Chicago Board Options Exchange Volatility Index (VIX INDEX)

Chicago Board Options Exchange Volatility Index (VIX INDEX)

The MAD Report - Cross Market Analysis

A weekly report looking at price action across major markets. In the short term both a stock market and a bond market squeeze seem possible in the...

Shyam Devani

Financial Markets Demand Greater Clarity from the Fed About the Future Path of Interest Rates

Financial markets are demanding greater Fed policy clarity. Chair Powell failed to provide this after the latest FOMC meeting. Elevated volatility...

DeSaque Macro Research

US Wages Are Resurgent, Even if Markets Haven't Noticed; Keep Your Eye on Inflation

Core CPI rose 10% annualized in 2Q2021; rentals will reflect surging house prices in 2H 2021. Wage inflation in June was 3.6%YoY on a high base....

Prasenjit K. Basu

VIX Index: How Concerned Should We Be?

The signs on the VIX Index not only show a historical similarity to the aftermath of the last crisis but also complement the bearish signs seen on...

Shyam Devani

VIX: Any Higher and There’s Trouble

Developments on the VIX Index suggest we are probably going to enter a short term period of higher volatility that is likely to see a lower S&P 500

Shyam Devani