Cross-Asset Crisis ‘Completely Rational,’ Popular Strategist Says
If it feels to you like the tension across markets admits of no readily discernible resolution, or that a cathartic capitulation in equities would prove insufficient as a release valve for the screeching macro-market tea kettle, you're not alone. And you're not wrong either.
The problem goes well beyond stocks. The dollar "wrecking ball" zeitgeist is a self-fulfilling prophecy. The outperformance and continued resilience of the US economy presents upside inflation risks for the Fed, which means
Just an aside. I take it that the fact that you posted three nice articles today means your island didn’t get nailed by Ian and you are OK. We are all thankful for that. Take care, sir.
I don’t really understand what happened in UK, but it seems like a significant part of it was improperly designed hedges. Would the situation in the UK have been more like Japan without that issue?
The impacts of rate hikes and “demand construction policies” will not be immediately apparent. There’s always a a time lag, apart from the signaling effect. Plus, I wonder how many support programs are actually handing out cash already.
So we’re facing a pretty long time line before we see the full impact of what’s being done now, much less the impact of policies which may follow.
The always neglected phrase: lag time. And my favorite element : war with Putin, and he
seems to be losing and in personal danger.
I think Putin’s potential demise is the one possible out for the world economy that doesn’t involve significant pain. Still highly unlikely, but what if we saw western-friendly regime change in Russia (and maybe Iran)? Maybe pair that with the end of zero Covid policy in China and a ratcheting down of tensions over Taiwan? Outside of those long-shot scenarios, it’s hard to imagine how we avoid a hard landing at this point.
Currency devaluation in a low inflation environment – good for the devalued (cheaper exports more competitive globally, costlier imports shift demand to domestic production). A lot of noise from countries with strong currencies (e.g. the US) about other countries unfairly weakening their currencies (e.g. China) to gain economic trade advantage.
Currency devaluation in a high inflation environment – bad for the devalued (costlier imports support higher inflation). Not currently hearing much noise from countries with strong currencies (e.g. the US) about other countries unfairly weakening their currencies (e.g. China) to gain economic trade advantage.
I guess it’s all a matter of context/perspective.
H-Man. on a totally unrelated topic. You live on an island, I surmise on the southeast coast of the United States based upon your posts.Which probably had some recent hurricane issues. I hope you have had a safe sailing during this tempest.