Daily Briefs

• Fears of a repeat of the 1970s inflation cycle are overblown. Inflationary expectations are well anchored and the pace of wage increases are decelerating.
• However, the IMF has warned of the risks of the deteriorating U.S. fiscal picture and investors have to acknowledge that we are in an age of fiscal dominance.
• For investors, the evolution of risk appetite will depend on changes in inflationary expectations and term premium.

• Stock prices have had to contend with a trifecta of woes: Fear of a hawkish pivot by the Fed; Strong USD; and Geopolitical risk and rising oil prices.
• The stock market is very oversold and ripe for a relief rally. The key question is: does the bounce represent a durable bottom or is there more downside ahead?
• As investors and traders wait for the inevitable bounce, here are what we are watching.

• China is preparing something BIG. That seems more and more obvious to me by the week now. The question is what that BIG thing is.
• China reported a strong 5.2% YoY Q1 despite troubles on the ground, local financial institutions are hoarding bonds because of a weak credit demand growth picture and the Chinese authorities seem to be stockpiling like crazy.
• We have seen plenty of tin-foil theories speculating in the reasons behind those Chinese actions, but maybe China is just preparing a major one-off devaluation of the CNY?

• Headlines in the beginning of 2024 were dominated by shipping and logistic troubles but over the last months that has almost died completely down.
• With “no news” we continue to see spill-overs to goods inflation in coming months.
• In general freight rates have been falling since Jan high but still remain some 50% above 2023 levels

• Tax receipts post-tax day are tracking about 15% above last year’s pace, below 2022 levels.
• Increase in electronic filings leads to quicker processing of tax receipts.
• TGA balances have increased by $250 billion to $930 billion, in line with 2022 trends.

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• Welcome to our weekly Portfolio Watch.
• We have returned -0,87% in our Macro Alpha Portfolio this week as of the time of writing, which is a decent return profile given the drawdowns seen across the asset universe.
• We have been sitting on our hands due to the trickiness of timing the missiles flying back and forth in the Middle East and due to our lack of conviction that the timing is right to re-enter riskier bets.

• I harness my hybrid nowcasting framework to track the growth prospects of the G3 (US, Euro Area and Japan) economies
• Overall, G3 real GDP growth seems to be tracking potentially slower, though uneven across the individual economies, in 1Q 2024
• My nowcasts imply that the G3 economies are unlikely to wiggle uniformly in the first-half of 2024 on balance