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Macro-State Discussion: Difference between revisions
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== January 2023 == | == January 2023 == | ||
'''Moritz:''' How are you seeing current developments and the outlook? Is there something i should urgently look at? Should i think about reducing investments a bit right now given the recovery or is the picture looking better already compared to 1-2 months ago? | '''Moritz:''' How are you seeing current developments and the outlook? Is there something i should urgently look at? Should i think about reducing investments a bit right now, given the recovery or is the picture looking better already compared to 1-2 months ago? | ||
'''Magaly:''' It Depends in your view about current data: | '''Magaly:''' It Depends in your view about current data: | ||
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- CPI coming down and expectation for the lower trend to continue this year | - CPI coming down and expectation for the lower trend to continue this year | ||
- FED will most likely pause soon, and markets are pricing rate cuts this year contrary to what the FED has said. | - FED will most likely pause soon, and markets are pricing rate cuts this year contrary to what the FED has said. https://twitter.com/biancoresearch/status/1613215357166043137 | ||
- China reopening could boost global demand: | - China reopening could boost global demand: https://www.bloomberg.com/news/articles/2023-01-18/china-reopening-could-boost-2023-global-economy | ||
- Markets are pricing a small chance of a possible recession or at least a serious one. | - Markets are pricing a small chance of a possible recession or at least a serious one. https://themacrocompass.substack.com/p/recession-or-soft-landing#details | ||
IMO markets are expecting that just a very soft economy weakness will cause the FED to cut rates in 2023, and the growth cycle will start again. I am not sure it is realistic. Either we have a soft landing and the FED can follow their plan, or we have a recession that will force the FED to cut rates. | IMO, markets are expecting that just a very soft economy weakness will cause the FED to cut rates in 2023, and the growth cycle will start again. I am not sure it is realistic. Either we have a soft landing and the FED can follow their plan, or we have a recession that will force the FED to cut rates. | ||
But US economy is now weaker than 1/2 months ago: | |||
* Housing is contracting very rapidly: https://www.reuters.com/markets/us/us-existing-home-sales-lowest-since-2010-price-growth-slows-2023-01-20/ | |||
* Manufacturing and services Sectors are both now contracting too, and new orders are not hinting a good outlook in production for next months either: Manufacturing: https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/december/ Services: https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/december/ | |||
* Industrial production and retail sales with negative growth in last 2 months: Retail sales: https://tradingeconomics.com/united-states/retail-sales Industrial productions: https://www.federalreserve.gov/releases/g17/current/default.htm | |||
* Money growth is negative for the first time ever, and QT is still going https://twitter.com/NorthmanTrader/status/1617965449093971969/photo/1 | |||
* Conference Board leading economic index is still not showing any signs of changing in momentum or a recovery, instead showing faster declines recently: https://www.conference-board.org/topics/us-leading-indicators | |||
The only thing for the economy still looking strong is the labor market, which is very lagging. And actually not good for markets because it will give more room to the FED to continue with high rates for a longer period, even if the economy is already weakening. | |||
My opinion is that as long as unemployment stays low, the FED will not care about any other economic data. They will react only when unemployment starts to rise (unless there is a credit event). This could be very damaging for the economy as an end result, companies have suffered from labor shortages, they will not be so quick to layoffs employees this time compare to other contractions. | |||