This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Steno Signals #99 – Freddie Mac gearing up to unleash trillions for consumption?
- Last week we learned that the so-called “excess savings pool” from the pandemic had vanished into thin air in the US, or rather that personal savings have been running sub-trend long enough to bring savings back to a normalized state.
- This does not mean that US households have run out of savings, it merely means that savings rates are running below trend, which is not out of the ordinary during late-cycle economies.
- We have recreated the study on German numbers and found much less “alarming” trends in German households, which goes to show that the methodology developed by the San Fran Fed ought to be taken with a pinch, if not even a truckload, of salt.
2. China Watch: No one has noticed that China is exporting INFLATION again..
- Welcome to our weekly EM editorial where we shed light on the most important developments in the EM space in the context of the impulses from the USD markets.
- Things are heating up in the global macro space as we are standing at crossroads.
- Is the macro momentum finally rolling over globally (including in the US) or are we amidst a potential rebound from China that wreaks havoc with the current increasingly dovish Western consensus?
3. Great Game – Why Putin fired Shoigu and Why Biden is going tough on China
- Welcome to this week’s geopolitical update, the Great Game.
- This week we’re covering Putin’s surprise sacking of Defense Minister Shoigu as well as the ongoing global EV war.
- Russian President Putin has replaced his Defense Minister Sergei Shoigu with former economic advisor and Deputy Prime Minister Andrei Beluosov.
4. Positioning Watch – How are Macro Hedge Funds positioned?
- Hello everyone, and welcome back to our weekly Positioning Watch – insights into how market participants are positioned.
- Markets are waiting patiently for the US CPI report today before placing their bets it seems, with little to no action seen yesterday and in European opening hours yesterday.
- As elaborated upon in our “Week At a Glance” on Monday, we see hawkish surprises to both headline and core inflation , which will not be good news for markets, who have seemingly returned to their hopes of rate cut(s) this year.
5. US CPI Review – Everything is soft in April
- Main Takeaways: Core inflation is still way too hot, but this report speaks well to the crowd hoping for rate cuts.
- Food and Shelter are the two dovish surprises… Both are re-accelerating in live data which will likely come into effect laterApril was super soft in real-time activity data and there isn’t much to suggest that it will continue in May, where data is on the rise again… But for now, this feeds the FCI loop in a positive sense, which will allow risk assets to ride the dovish CPI wave for now.
- US Headline CPI rose 0.31% on the month, whilst core inflation increased by 0.29%, with consensus at 0.4% and 0.3%.
6. Quant Signals: Central Bank Sentiment Indicators
- Our updated state-of-the-art Central Bank Sentiment indicators are flagging important changes in communication dynamics since the beginning of the year.
- We recently upgraded our sentiment measurement to a more fine-tuned and nuanced NLP model that effectively captures the meaning of Central Banker rhetoric and here share key findings.
- We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.
7. Five Reasons to Be Bullish
- A review of technical and sentiment conditions shows that stock prices are setting up for a sustained advance.
- The combination of strong momentum, good breadth and skeptical sentiment points to higher stock prices.
- Key risks are evidence of a disturbing relative strength by defensive sectors and an upcoming CPI report that could upend the bullish narrative.
8. China Takes It up Another Notch-Property Proposals Change the Game
- China is following the Fed’s playbook of keeping market momentum going with good news and actions
- The HK dividend scheme is a prime example of that
- The latest proposal for unsold properties will remove a major barrier to a bottom in the property market.
9. NFIB Watch: 5 KEY charts from the best survey on the US economy
- Our favorite survey out of the US economy was published earlier and it was a pretty decent report overall as the sentiment among SMEs improved, but there are a few trends worth noting in the details, so why don’t we briefly walk you through them here.
- For the first time in a long while, we see a clear net/net decrease in expectations for future price hikes.
- This is conciliatory news for Jay Powell and his ilk for H2-2024 (but not before then..)
10. Long 10Y, Short 2Y on Yield Curve Normalisation
- Fed’s decision to taper its balance sheet runoff has provided support to long-term treasuries, particularly 10-year notes, signaling a potential rise in demand and a move towards yield curve normalization.
- Recent treasury auction results reflect a divergence in demand across maturities; long-term 10-year treasuries show weaker performance compared to strong showings in shorter 3-year and 5-year maturities.
- Data-Dependent Fed is likely to be influenced by improving economic indicators, supporting a normalization of the yield curve. During normalization, the 10Y-2Y spread is the superior instrument for exposure.
