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

US real GDP could surpass its previous cyclical peak in Q1, thereby casting serious doubts about the necessity for additional fiscal stimulus as proposed by the Biden Administration. Bond investors are concerned about the inflationary implications of further fiscal and monetary easing from the perspective of excessive aggregate demand, but little analysis has hitherto been performed about the supply-side implications.
As COVID-19 vaccine rollouts eliminate the need for lockdowns, supply-demand imbalances will emerge as companies wait to ensure no risks of relapse before bringing mothballed capacity back on stream. Delivery delays have risen over the past year due to labour-safety measures and transportation constraints, but these should improve with vaccine rollouts, thereby reducing supply shortfalls.
The timing of the proposed $1.9 trillion fiscal stimulus would not have been approved by John Maynard Keynes, the original proponent of running budget deficits to support demand. The stimulus is massively front-end loaded for political purposes and does nothing to enhance the supply-side of the US economy.
Increasing the federal minimum wage to $15 per hour by 2025 will raise the cost of low-pay workers and could encourage firms to invest in labour-saving technology. Higher minimum wages will boost demand in the short-term due to the higher marginal propensity to consume of low-pay workers, but the potential substitution of labour for capital by firms will eventually provide an offset.
In contrast to the previous recovery, there has been a strong and rapid rebound in the level of job openings in the economy as those sectors that were initially badly impacted by COVID-19 recover. Meanwhile, opponents of continued extended unemployment insurance argue that high levels of unfilled job openings are consistent with unemployed workers having little financial incentive to look for work, thereby justifying a reduction in benefits. The civilian labour force participation rate has fallen over the past year, and the risks of significant wage inflation will increase if the Fed allows the economy to let rip and there is no offsetting increase in labour supply.

US real GDP could surpass its previous cyclical peak in Q1, thereby casting serious doubts about the necessity for additional fiscal stimulus as proposed by the Biden Administration. Bond investors are concerned about the inflationary implications of further fiscal and monetary easing from the perspective of excessive aggregate demand, but little analysis has hitherto been performed about the supply-side implications.
As COVID-19 vaccine rollouts eliminate the need for lockdowns, supply-demand imbalances will emerge as companies wait to ensure no risks of relapse before bringing mothballed capacity back on stream. Delivery delays have risen over the past year due to labour-safety measures and transportation constraints, but these should improve with vaccine rollouts, thereby reducing supply shortfalls.
The timing of the proposed $1.9 trillion fiscal stimulus would not have been approved by John Maynard Keynes, the original proponent of running budget deficits to support demand. The stimulus is massively front-end loaded for political purposes and does nothing to enhance the supply-side of the US economy.
Increasing the federal minimum wage to $15 per hour by 2025 will raise the cost of low-pay workers and could encourage firms to invest in labour-saving technology. Higher minimum wages will boost demand in the short-term due to the higher marginal propensity to consume of low-pay workers, but the potential substitution of labour for capital by firms will eventually provide an offset.
In contrast to the previous recovery, there has been a strong and rapid rebound in the level of job openings in the economy as those sectors that were initially badly impacted by COVID-19 recover. Meanwhile, opponents of continued extended unemployment insurance argue that high levels of unfilled job openings are consistent with unemployed workers having little financial incentive to look for work, thereby justifying a reduction in benefits. The civilian labour force participation rate has fallen over the past year, and the risks of significant wage inflation will increase if the Fed allows the economy to let rip and there is no offsetting increase in labour supply.    

Misguided US Stimulus Offers Little Help to Supply-Side to Offset Potential Inflation Risks

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The recent rate surge has upset the picture for growth stocks and, consequently, the S&amp;P 500 is going through a consolidation phase. While we cannot say precisely how deep this pullback will be or if the lows are already in, ongoing positive market dynamics tell us the pullback is likely to be contained and therefore should be viewed as a buying opportunity. With that said, a break below 3789 would signal additional downside ahead. In today’s report we highlight attractive Groups and stocks within Energy and Manufacturing (Agricultural Equipment).

The recent rate surge has upset the picture for growth stocks and, consequently, the S&amp;P 500 is going through a consolidation phase. While we cannot say precisely how deep this pullback will be or if the lows are already in, ongoing positive market dynamics tell us the pullback is likely to be contained and therefore should be viewed as a buying opportunity. With that said, a break below 3789 would signal additional downside ahead. In today’s report we highlight attractive Groups and stocks within Energy and Manufacturing (Agricultural Equipment).

U.S. Equity Strategy: Upgrading Financials, Downgrading Technology & Consumer Discretionary

Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

Credit

<a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> stock is tumbling, again, and its overpriced bonds are frozen in the headlights with nowhere to go but down.
The reason given for this latest rout is that Tesla needed to shut down production for two weeksdue to supply chain disruptions in parts and supplies caused by the severe winter storm which swept much of the country in recent weeks.
Except when the stock plunged CEO Elon Musk opened the plant back up after just two days.
Which suggests that Tesla can make all the cars its needs. It just doesn't need as many as it hoped to mean faltering demand.

Tesla Motors (TSLA US) stock is tumbling, again, and its overpriced bonds are frozen in the headlights with nowhere to go but down.
The reason given for this latest rout is that Tesla needed to shut down production for two weeksdue to supply chain disruptions in parts and supplies caused by the severe winter storm which swept much of the country in recent weeks.
Except when the stock plunged CEO Elon Musk opened the plant back up after just two days.
Which suggests that Tesla can make all the cars its needs. It just doesn't need as many as it hoped to mean faltering demand.

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 steepening yield curve reinforces our view that the US$900 billion stimulus enacted at end-2020 will largely close the US output gap in the current quarter. The new Biden stimulus of US$1.9 trillion (pushing this year's fiscal deficit to a post-WWII record of 20% of GDP) will render further monetary stimulus superfluous. The Fed will be obliged to rein in QE in 2Q 2021, and actual raise the Fed Funds rate no later than its July 2021 meeting. We are bearish equities on a 6-month view, and bullish the US dollar. We reiterate our view articulated in December 2020 (<a href="https://www.smartkarma.com/insights/2021-to-mark-the-return-of-inflation-fed-hike-by-mid-year-implies-risk-off-by-2q-21" target="_blank" data-smartkarma-citation="insights:46348" rel="noopener">2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21  </a>elaborating on our June 2020 view <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> ) that US core PCE inflation will begin to tick up toward 2% YoY by mid-2021, obliging the Fed to cut back on the size of QE, reducing its monthly purchases from the US$120 billion that it has promised. In January 2021, US base money grew by US$41 billion (much less than the promised figure), but this sufficed to boost M2 by 25.5% YoY: we observe that 24% YoY M2 growth (more than double the peak pace of M2 growth in 2009) has become an implicit target while core inflation is subdued and labour-market slack remains.The US output gap didn't close as much as expected in 4Q 2020 because of the spurt in Covid-19 infections, but the likely passage of Biden's US$1.9 trillion stimulus package (on top of the US$900 billion package enacted at the end of 2020) will cause the fiscal deficit to hit a record 20% of GDP in FY2021. The previous stimulus is likely to largely close the output gap in the current quarter (with real GDP likely to be only about 1% below its potential) based on the December 2020 stimulus. A further massive fiscal stimulus will make the Fed's QE superfluous.Inflationary expectations (as reflected in the 5-year TIPS/Treasury breakeven rate) are already for average inflation of 2.4% over the next 5 years. When a further fiscal stimulus pushes this year's fiscal deficit to a record 20% of GDP, core PCE inflation will quickly print above 2% YoY, obliging the Fed to cut back on its promised monthly QE during 2Q 2021, and to actually raise the Fed Funds rate by its July 2021 FOMC meeting.

The steepening yield curve reinforces our view that the US$900 billion stimulus enacted at end-2020 will largely close the US output gap in the current quarter. The new Biden stimulus of US$1.9 trillion (pushing this year's fiscal deficit to a post-WWII record of 20% of GDP) will render further monetary stimulus superfluous. The Fed will be obliged to rein in QE in 2Q 2021, and actual raise the Fed Funds rate no later than its July 2021 meeting. We are bearish equities on a 6-month view, and bullish the US dollar. We reiterate our view articulated in December 2020 (2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21  elaborating on our June 2020 view Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021 ) that US core PCE inflation will begin to tick up toward 2% YoY by mid-2021, obliging the Fed to cut back on the size of QE, reducing its monthly purchases from the US$120 billion that it has promised. In January 2021, US base money grew by US$41 billion (much less than the promised figure), but this sufficed to boost M2 by 25.5% YoY: we observe that 24% YoY M2 growth (more than double the peak pace of M2 growth in 2009) has become an implicit target while core inflation is subdued and labour-market slack remains.The US output gap didn't close as much as expected in 4Q 2020 because of the spurt in Covid-19 infections, but the likely passage of Biden's US$1.9 trillion stimulus package (on top of the US$900 billion package enacted at the end of 2020) will cause the fiscal deficit to hit a record 20% of GDP in FY2021. The previous stimulus is likely to largely close the output gap in the current quarter (with real GDP likely to be only about 1% below its potential) based on the December 2020 stimulus. A further massive fiscal stimulus will make the Fed's QE superfluous.Inflationary expectations (as reflected in the 5-year TIPS/Treasury breakeven rate) are already for average inflation of 2.4% over the next 5 years. When a further fiscal stimulus pushes this year's fiscal deficit to a record 20% of GDP, core PCE inflation will quickly print above 2% YoY, obliging the Fed to cut back on its promised monthly QE during 2Q 2021, and to actually raise the Fed Funds rate by its July 2021 FOMC meeting. 

US: Steepening Yield Curve Is a Harbinger of Inflation That'll Oblige Fed to Tighten

Despite concerns of excessive fiscal stimulus, observers are resigned to the Fed allowing the economy to "run hot" in its aftermath without any monetary offset. Investors need to remember Fed policy is data dependent and that there is still sufficient economic slack to assist the riskier segments of the capital structure before any tightening measures are undertaken.
Structural headwinds have offset cyclical  forces to prevent rising US inflation in recent years, but it is still uncertain whether these restraints can counter sustained Modern Monetary Theory (MMT) by the Fed and US Treasury. Future trends in the velocity of circulation of money will determine whether expansion of monetary aggregates translates into rising prices. Japan provided the Fed with an example where significant and sustained economic stimulus did not produce inflation due to arrival of deflationary psychology. 
The recent behaviour of inflationary expectations has defied predictions, which, in turn, were based on historic perceptions of slow declines and rapid increases. Inflationary expectations failed to rise materially during the two most recent economic expansions, thereby indicating the arrival of stubborn deflationary psychology that also fundamentally altered the relationship between equity prices and bond yields.  The current rise in US Treasury yields does not constitute a full-blown repeat of the 2013 taper tantrum. 
<div>The Federal Open Market Committee (FOMC) announced that socially inclusive metrics will form part of their framework for assessing labour market conditions, raising the prospect of policy being kept looser for longer if inflation remains benign. Incoming economic data in 2021 H2 will crucial for investors in determining whether the Fed will be forced to change their expected dovish policy path in 2022.  </div>

Despite concerns of excessive fiscal stimulus, observers are resigned to the Fed allowing the economy to "run hot" in its aftermath without any monetary offset. Investors need to remember Fed policy is data dependent and that there is still sufficient economic slack to assist the riskier segments of the capital structure before any tightening measures are undertaken.
Structural headwinds have offset cyclical  forces to prevent rising US inflation in recent years, but it is still uncertain whether these restraints can counter sustained Modern Monetary Theory (MMT) by the Fed and US Treasury. Future trends in the velocity of circulation of money will determine whether expansion of monetary aggregates translates into rising prices. Japan provided the Fed with an example where significant and sustained economic stimulus did not produce inflation due to arrival of deflationary psychology. 
The recent behaviour of inflationary expectations has defied predictions, which, in turn, were based on historic perceptions of slow declines and rapid increases. Inflationary expectations failed to rise materially during the two most recent economic expansions, thereby indicating the arrival of stubborn deflationary psychology that also fundamentally altered the relationship between equity prices and bond yields.  The current rise in US Treasury yields does not constitute a full-blown repeat of the 2013 taper tantrum. 
The Federal Open Market Committee (FOMC) announced that socially inclusive metrics will form part of their framework for assessing labour market conditions, raising the prospect of policy being kept looser for longer if inflation remains benign. Incoming economic data in 2021 H2 will crucial for investors in determining whether the Fed will be forced to change their expected dovish policy path in 2022.  

Outlook for US Treasuries and Fed Policy: Beware the Lingering Legacies of Deflationary Psychology

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

Misguided US Stimulus Offers Little Help to Supply-Side to Offset Potential Inflation Risks

The timing and size of additional US fiscal is misguided. Emphasis is placed on the demand-side of the economy. Little help is offered to aggregate...

DeSaque Macro Research

U.S. Equity Strategy: Upgrading Financials, Downgrading Technology & Consumer Discretionary

The recent rate surge has upset the picture for growth stocks and, consequently, the S&P 500 is going through a consolidation phase.

Vermilion Research

Tesla Is Falling and It Can't Get Up

Tesla stock is tumbling and its overpriced bonds are frozen in the headlights with nowhere to go but down. Deliveries are sputtering, and Elon's...

Vicki Bryan

US: Steepening Yield Curve Is a Harbinger of Inflation That'll Oblige Fed to Tighten

The steepening yield curve validates our view that $900bn stimulus will close the US output gap in 1Q2021. Biden's $1.9tn stimulus renders QE...

Prasenjit K. Basu

Outlook for US Treasuries and Fed Policy: Beware the Lingering Legacies of Deflationary Psychology

Prospects of further fiscal stimulus have stoked investors' inflation fears as the Fed exhibits no interest in providing monetary offsets. Recent...

DeSaque Macro Research