Econosights: What are inflation expectations telling us? Key points An increase in short-term consumer inflation expectations reflects the current high inflation environment. While consumers are assuming that inflation will remain elevated at its current level for the next 1-2 years, this is unlikely as forward-looking inflation indicators have been falling for months. Australian medium-term inflation expectations remain well anchored which indicates that the market believes in the RBA’s 2-3% inflation target and does not …
Econosights: Four reasons to expect a softer US economy in 2022 Key points The US economy is facing numerous headwinds in 2022 which will slow US economic growth. Inflation is too high, interest rates are going to rise, the value of the Fed’s balance sheet will fall and fiscal “thrust” has turned negative. These factors are also leading to a peak in earnings growth. We expect lower equity returns in the US market in 2022 …
US faces stiff headwinds in 2022 What happens to interest rates locally and globally is always important for investors, but particularly so at turning points in the economy. And notwithstanding the recent Omicron outbreak, the world’s most influential central bank, the US Federal Reserve, looks likely to lift interest rates as early as March. It would be the first increase in more than three years and marks a significant turning point in the global economic …
US political protests, inflation and rising bond yields Key points US protests are only an issue for investment markets if they significantly impact economic activity. Global and Australian recovery will boost bond yields and there is good reason to believe that (after yet another false ending) the now nearly 40-year super cycle decline in bond yields may be at or close to over. But the end of the bond bull market is likely to be …
US reporting season and the tech sector AMP Capital chief economist Shane Oliver says revenue disappointments and slowing user growth at technology giants Facebook and Twitter is a warning that the US tech sector could at some stage underperform – or even suffer a serious correction. “What those disappointments tell us is there is a limit to the take up of social media,” he says. “At some point it will start to slow down.” …
Trumponomics and investment markets Key points So far President Trump has been positive for share markets but this year the focus is increasingly shifting to populist policies with greater risk for investors. The key risks to keep an eye on in this regard relate to trade conflict and the expanding US budget deficit, although the latter is more a risk for when the US economy next turns down. However, the best approach for investors in …
The US economy – does the flattening yield curve indicate recession is imminent? Key points If you are worried about a major bear market, the US economy is the key to watch. While traditional measures of the US yield curve have flattened sending warning signs about future growth, it has given false signals in the past, is still positive and other versions of the yield curve point to rising growth. Moreover, apart from very low …
US China trade war fears – Q & A Key points President Trump’s actions on trade are mainly aimed at achieving better access for US exports to China and better treatment of US intellectual property by China. They are not primarily aimed at traditional US allies, reducing the risk of a global trade war. So far there is only a “phoney trade war” between the US and China as major tariffs are only “proposed”. Signs …
The “gradually” maturing investment cycle – what is the risk of a US recession? Key points With inflationary pressures starting to rise in the US the global investment cycle is starting to get more mature. This is likely to mean a further rise in bond yields and more share market volatility. However, there is still little sign of the sort of excesses that precede economic downturns, profit slumps and major bear markets suggesting that we …
