Central Banks face a mighty challenge persuading markets and depositors the banking system is stable. The war between chaos and order in markets has turned hot. At stake is the stability and future of the global economy. Anyone for the last few choc ice?
SVB is a crisis averted, but the market wasn’t paying close attention which spells opportunity. There are bigger risks from central banks being distracted from fighting inflation and normalising rates. That’s the real crisis!
The market is talking about a no-landing scenario – but should be watching what Central Banks are saying, and China’s position re Ukraine. The market remains vulnerable to recession and rising geopolitical tensions. They are very closely linked.
As traders rationalise what Central Bankers say about higher for longer rates, its time to reflect on just why markets and the real economy seem out of line and disconnected. The real issue is about how to reconnect growth and consumption, and that has implications for wages!
Rugby, Balloons and Employment Data – so much to consider this morning, but what this market needs a dose of common sense, understanding of central banks, and catharsis. Real interest rates and normalisation will provide solid foundations for real growth and recovery – not market froth!
Something different this morning – is the inflation threat really about to be corked back in its bottle? My head of research, Ernst Knacke thinks so.. so this morning I’m letting him argue the point on where inflation is headed and how to position for lower inflation next year!
In Bonds There is Truth – but until Real bond yields turn positive they remain financially repressive. If Central Banks “pivot” from tightening rates to address inflation too early, markets will remain fundamentally distorted.
Everyone is balancing inflation, economic numbers and this week’s Jackson Hole Central Bank smooze-a-thon to guess markets. What if we are looking at the wrong things – and economic divergence, income and wealth inequality and unravelling domestic politics are the critical factors?
The world is watching for signs confirming global recession, so naturally markets have rallied (!). Political instability is resolved to be replaced with some bleak truths and spending choices. So.. steady at the wheel, nothing to worry about then?
Central Banks and Politics will be the dominant theme this week/month/year. Politicians are anxious to show inflation and recession are not their fault. Blame Central Banks! The Politics of Blame has profound consequences for markets.
