Developed Countries

Highlights This week’s FOMC meeting confirmed that the Fed is on hold. We would downplay Powell’s reference to the decline in inflation as being “transitory”. Strictly speaking, he is correct. All of the decline in core inflation since last September has occurred in just two categories: financial services and clothing/footwear. The bigger point is that the Fed no longer sees fit to raise rates even though the unemployment rate is at a 50-year low and real rates are barely positive. Both the Fed and the markets have completely bought into two of Larry Summers’ core views, which are that the neutral rate of interest is much lower today than in the past, and that the Fed should wait to see the “whites of inflation’s eyes” before raising rates any further. We think the neutral rate will prove to be higher than widely believed and that the Fed will eventually find itself far behind the curve. Risk assets may see heightened volatility over the next few days as markets adjust to the fact that rate cuts are not forthcoming. Nevertheless, with rates still far below our estimate of neutral, the path of least resistance for global equities remains to the upside. The bull market in stocks will only end when inflation moves significantly higher, requiring the Fed to hike rates aggressively. That is unlikely to happen during the next 12 months. Feature Gentle Jay Ruffles The Markets … Transitorily This week’s FOMC statement confirmed that the Fed is on hold. In sharp contrast to his claim last October that rates were “a long way from neutral,” Chair Powell stressed during his press conference that there was no strong case for moving rates in “either direction.” Equities initially rose, while the dollar weakened, only to reverse direction following Powell’s subsequent comment that the recent decline in inflation was “transitory.” We would not make a big deal of Powell’s “transitory” remark. As a factual matter, he is correct. Table 1 shows that almost all of the decline in core PCE inflation from 2% in September 2018 to 1.6% in March 2019 can be explained by a drop in inflation in two categories: financial services and clothing/footwear. The former was weighed down by the steep decline in equity prices late last year (Chart 1). The latter was affected by a methodological change in how the Bureau of Labor Statistics calculates apparel prices.1    Table 1Weaker Core PCE Inflation Driven Mainly By Financial Services Chart 1Stock Market Swings Feed Into Price Indices The more important takeaway is that the Fed is now in a “wait and see” mode. Considering that the unemployment rate is at a 50-year low and real rates are barely positive, this is an extraordinary development. How to explain it? Two words: Larry Summers. Everyone Loves Larry Six years after President Obama dashed Larry Summers’ hopes of becoming the next Fed chair by anointing Janet Yellen instead, the former Treasury Secretary’s shadow hangs over the central bank like never before. Two of Summers’ key views – that the neutral rate of interest is much lower today than in the past, and that the Fed should wait to see the “whites of inflation’s eyes” before raising rates any further – have become accepted wisdom not just at the Fed, but on Wall Street as well. At the same time, another of Larry Summers’ core beliefs, that the Fed should aim for an inflation rate above the current target of 2%, is gaining traction.   This raises an important question: What would it mean for investors if all these hypotheses turned out to be wrong? Let’s examine the arguments. How Low Is The Neutral Rate Of Interest? Conceptually, the interest rate on safe government securities should adjust to ensure that global savings equal investment. Interest rates will fall if either desired savings rise or desired investment declines (Chart 2). To the extent that some countries have more savings and/or fewer worthwhile domestic investment opportunities than others, they will run current account surpluses. Countries with less savings and better investment prospects will run current account deficits (Chart 3). There is a strong case to be made that the neutral rate of interest has fallen over the past few decades. Potential GDP growth in developed economies has slowed. This has reduced the need for new capital investment. The advent of the digital age, or the “demassification” of the economy as Summers calls it, has also brought down the amount of physical capital firms need to function. Meanwhile, China’s entry into the global economy greatly expanded productive capacity without a concomitant increase in spending, thus creating the “savings glut” that Ben Bernanke first described in 2005. The question is how will these forces evolve over the coming years? According to the standard “accelerator” model, the optimal level of investment spending is determined by the growth rate of aggregate demand.2 As Chart 4 illustrates, most of the decline in trend real GDP growth in developed economies occurred between 1960 and 2000. Growth may decelerate further over the next decade, but not by much. Chart 5Dependency Rates Are Rising Again In Developed Economies   Investment growth in China is likely to slow, but savings could also decline as a more robust consumer culture emerges and the government continues to take steps to strengthen the social safety net. Population aging in China and elsewhere could also erode savings. Falling fertility rates in most of the world starting in the early 1960s led to a decline in dependency rates in the 1980s and 1990s (Chart 5). However, now that baby boomers are starting to retire, dependency rates are rising. Once health care spending is included, consumption increases in old age, especially in the last few years of life (Chart 6). Globally, the ratio of workers-to-consumers peaked earlier this decade. The pace of the decline in this ratio is set to accelerate over the next few decades (Chart 7). More desired consumption relative to any given level of production implies less savings and a higher neutral rate of interest. Chart 6Savings Over The Life Cycle Chart 7The Worker-To-Consumer Ratio Has Peaked Globally   Even in Japan, the neutral rate may be stealthily moving higher (Chart 8). Despite an influx of women into the labor market, the household savings rate has fallen from nearly 20% in the early 1980s to around 4% of late. The ratio of job openings-to-applicants has risen to a 45-year high. The trade balance has moved into deficit. Yet, 20-year inflation swaps are trading at 0.3%, implying that investors do not expect the Bank of Japan to achieve its 2% inflation target anytime soon. They may be in for a big surprise. Gauging The Cyclical Drivers Of The Neutral Rate At its core, the secular stagnation thesis is a theory about the long-term determinants of interest rates. It says little about the appropriate level of interest rates over cyclical horizons of a few years, even though that is the period over which monetary policy decisions tend to affect the economy. Today, aggregate demand in the United States is being buoyed by a number of cyclical forces. These include very loose fiscal policy, fairly strong credit growth (especially among corporates), high levels of asset prices, and faster wage growth at the bottom of the income distribution (Chart 9). All of these forces are helping to lift the neutral rate of interest. Chart 8Japan May Be Slowly Moving Towards Higher Inflation Chart 9U.S.: Cyclical Forces Are Propping Up Demand Consider the impact of looser fiscal policy. The IMF estimates that the U.S. structural budget deficit averaged 3.2% of GDP in 2015. In 2019, the IMF reckons it will average 5.2% of GDP. The budget deficit could rise further if Trump and Congress succeed in negotiating a new infrastructure package or if, as is likely, the Democrats insist on new spending measures as a condition for increasing the debt ceiling later this year. For the sake of argument, let us suppose that every $1 of additional fiscal stimulus adds $1 to aggregate demand. In this case, fiscal policy has added about 2% of GDP to annual aggregate demand over the past five years. Suppose that a one percentage-point increase in aggregate demand raises the appropriate level of interest rates by one percentage point, which is in line with the specification of the Taylor Rule that former Fed Chair Janet Yellen favored. This implies that fiscal policy alone has raised the neutral rate by over two percentage points over this time period. Laubach-Williams And The Fed Pause The discussion above suggests that the neutral rate of interest may be much higher than what the widely-used Laubach-Williams (LW) model implies. The LW model essentially calculates the trend growth rate of the economy in order to come up with its estimate for the neutral rate (Chart 10). It is an overly simplistic approach, as it ignores all the other factors influencing savings and investment decisions. Nevertheless, it seems to be driving the Fed’s thinking to a significant degree. Chart 11Things That Make The Fed Go "Hmm"... The real fed funds rate reached the LW estimate for the first time in 11 years last December (Chart 11). While we would not go as far as crediting the model for the Fed’s decision to go on hold – the sell-off in stocks and the flattening of the yield curve played a much larger role – the Fed’s reliance on the model does explain why it has maintained a dovish stance this year even as financial conditions have eased. Waiting For The Whites Of Inflation’s Eyes To his credit, John Williams, who helped develop the model more than 15 years ago, and now serves as the President of the New York Fed and the Vice Chair of the FOMC, has stressed that there is a wide band of uncertainty around any estimate of the neutral rate. Given this inherent uncertainty, a growing number of policymakers have shifted towards the Summers view that it is better to err on the side of caution and take a go-slow approach to raising rates. The rationale is straightforward: If the neutral rate turns out to be higher than expected and inflation starts to accelerate, central banks can always tighten monetary policy. In contrast, if the neutral rate is very low, the decision to raise rates could plunge the economy into a downward spiral. Historically, the Fed has cut rates by about six percentage points during recessions (Chart 12). At present rates of inflation, that would surely mean that the zero lower bound on interest rates would be reached, at which point monetary policy becomes increasingly impotent. Chart 12The Fed Is Worried About The Zero Bound A major drawback to waiting too long to raise rates is that it can take up to 18 months for changes in monetary policy to affect the economy. Inflation is also a highly lagging indicator: It normally does not peak until after a recession has begun, and does not bottom until the recovery is well underway (Chart 13). By the time you realize that the economy is overheating, it may be too late to prevent inflation from rising. Of course, in the minds of many influential economists, higher inflation would be a virtue rather than a vice. Summers has argued that the Fed should aim to bring inflation into a range of 3%-to-4% in order to ensure that real rates can fall far enough into negative territory during the next recession. Higher inflation could also alleviate the nominal wage rigidity problem, thus allowing real wages to adjust more readily in response to economic shocks. The risk of aiming for higher inflation is that you will get more of it than you bargained for. True, inflation was broadly stable in the mid-to-late 1980s at around 4%, but this followed a period of much higher inflation in the late 1970s/early 1980s (Chart 14). It may be more difficult to stabilize inflation after it has risen than after it has fallen. This is especially likely to be the case if the central bank has purposely taken steps to raise inflation. Chart 14Inflation Was Broadly Stable At Around 4% In The Mid-To-Late 1980s Supersymmetry: Inflation Edition The Fed is not about to raise its inflation target anytime soon. It is, however, rethinking the manner in which it conducts monetary policy in a way that will probably lead to somewhat higher inflation. Under the Fed’s existing framework, its “symmetric” inflation target is not supposed to be backward-looking. Symmetry simply means that the Fed targets 2% inflation every year, allowing for an equal probability of inflation ending up overshooting its mark as undershooting it. If inflation has missed its target in the past, this does not give the Fed license to try to exceed it in the future. Bygones are bygones. Chart 16Inflation Has Been Below The Fed's 2% Target For The Past 10 Years This definition of symmetry is starting to shift to one that is both forward-looking and backward-looking. This effectively brings the Fed one step closer to adopting price-level targeting – an idea John Williams has spoken glowingly about. Under a price-level targeting regime, the Fed would try to keep the price level on a predetermined trend (Chart 15). Inflation undershoots would have to be rectified with overshoots, and vice versa. This is obviously relevant for the current environment. Chart 16 shows that the core PCE deflator is now 4.6% below where it would have been if it increased by 2% per year since the financial crisis. Even if the Fed did not change its inflation target, bringing the deflator back towards its pre-crisis trend would still require that inflation run above the Fed’s target over the next few years. As Neel Kashkari said earlier this year: “We officially have a symmetric target and actual inflation has averaged around 1.7%, below our 2% target, for the past several years.  So if we were at 2.3% for several years that shouldn't be concerning.”3 Investment Conclusions Risk assets may see heightened volatility over the next few days as markets adjust to the fact that rate cuts are not forthcoming. Nevertheless, with rates still far below our estimate of neutral, the path of least resistance for global equities remains to the upside. Recessions typically do not occur when monetary policy is accommodative. The stock market, in turn, rarely falls in a sustained manner when the economy is expanding (Chart 17). This view prompted us to upgrade global equities in December. We remain cyclically bullish today. Chart 17Recessions And Bear Markets Usually Overlap Regionally, we do not have any strong preferences at the moment, but expect to upgrade EM and Europe by this summer. Despite the occasional disappointment such as this month’s manufacturing ISM, a broad swath of the evidence suggests global growth is reaccelerating (Chart 18). EM and European stocks tend to outperform in that environment. The dollar tends to weaken when the global economy strengthens (Chart 19). Hence, the greenback should enter a soft patch over the coming months which could last until the second half of next year. Chart 18Global Growth Is Reaccelerating Chart 19The Dollar Is A Countercyclical Currency Global bond yields will drift higher over the coming months as global growth surprises on the upside. Investors should position for somewhat steeper yield curves globally. The U.S. yield curve will flatten again late next year as inflation starts to reach levels that even a dovish Fed is not comfortable with. This will likely set the stage for an inversion of the yield curve in early 2021 and a global recession later that same year.    Peter Berezin, Chief Global Strategist Global Investment Strategy peterb@bcaresearch.com Footnotes 1      “Government Economists Turn to Big Data to Track the Economy,” The Wall Street Journal, April 30, 2019. 2       In most economic models, the capital-to-output ratio is assumed to converge towards a stable level over time. By definition, the capital stock in Year t is determined by the capital stock in Year t-1 plus whatever net investment (gross investment minus depreciation) takes place in Year t. In general, the optimal net investment-to-GDP ratio will equal the product of the capital-to-output ratio and the growth rate of GDP. For example, suppose that the capital-to-output ratio is three (meaning that the capital stock is three times as large as GDP). If output does not change from one year to the next, no additional net investment would be necessary to maintain a stable capital-to-output ratio. However, if output is growing at 2%, net investment of 3X2%=6% of GDP would be required. 3      “Fed's Kashkari says some overshoot on inflation would not be alarming,” Reuters, April 11, 2019. Strategy & Market Trends MacroQuant Model And Current Subjective Scores Tactical Trades Strategic Recommendations Closed Trades

​​​​​​​Underweight (High-Conviction) The last two weeks have seen earnings reports from the S&P interactive media & services index’s heavyweights Alphabet (the parent of Google) and Facebook and the prints were varied. Facebook reported revenue ahead of estimates and falling, but still solid, margins and the stock price soared. However, Alphabet reported slowing growth that drove the worst single-day share performance in seven years. A theme in both quarterly results were regulatory fines; privacy violations saw Facebook set aside $3 billion for an expected fine from the Federal Trade Commission while Alphabet’s earnings were lowered by the $1.7 billion fine over advertising violations from the EU. As a reminder, increasing regulation is core to our high-conviction underweight thesis. With respect to fundamentals, the S&P interactive media & services index’s forward earnings growth has fallen below that of the broad market (second panel) while above-market share price performance so far in 2019 has driven the valuation premium to extreme levels (bottom panel). This is a mismatch that we expect to be resolved via significant relative underperformance in the year to come. We reiterate our high-conviction underweight recommendation. The ticker symbols in the stocks in this index are: S5INMS – GOOGL, GOOG, FB, TWTR and TRIP.

Overweight The S&P tech hardware, storage & peripherals (THSP) index was cheering yesterday as index heavyweight Apple reported results that, while not strong, were better than the market had feared after the terrible Q4 print. Importantly, management commented that the rate of decline in China had eased significantly over the course of the quarter while services revenues hit a new record. Perhaps more important to equity investors was the $27 billion the company returned to shareholders in Q1, the authorization of another $75 billion for share repurchases and a 5% increase in the dividend. In the context of the still-pristine sector balance sheets (bottom panel), further shareholder friendly actions seem likely. Nevertheless, while sector valuations have bounced off the recent relative lows, the S&P THSP index continues to trade at a wide (though shrinking) discount to the broad market (second panel). We continue to find this discount excessive in anticipation of a sector rerating. Bottom Line: Troughing results in China, progress in services and a surge in return of capital to shareholders all point to more gains for the S&P THSP index; stay overweight. The ticker symbols for the stocks in the S&P THSP index are: BLBG: S5CMPE - HPQ, WDC, STX, XRX, AAPL, HPE, NTAP.

Highlights Open an equity market relative overweight to Europe versus China. Upgrade Denmark to neutral. Downgrade the Netherlands to underweight. Maintain Switzerland at overweight. With the Euro Stoxx 50 now up almost 20 percent from its January 3 low, the majority of this year’s absolute gains have already been made. Core euro area bond yields will edge modestly higher… …and EUR/USD will appreciate, as the backward-looking data on which the ECB depends catches up with the more perky real-time economic data.   Feature Vertical charts scare us, as we contemplate falling over the edge. But they also excite us, as we contemplate a lucrative investment opportunity. Right now, the vertical chart that is causing us palpitations is technology versus healthcare (Chart of the Week).  Chart of the WeekTechnology Versus Healthcare Has Gone Vertical! The technology versus healthcare sector pair is critical, because it looms large in several stock markets’ ‘fingerprint’ sector skews. Meaning that the technology versus healthcare relative performance has unavoidable consequences for regional and country stock market allocation (Chart I-2 and Chart I-3). The technology versus healthcare sector pair is critical, because it looms large in several stock markets’ ‘fingerprint’ sector skews. Chart I-2When Technology Underperforms Healthcare, Netherlands Underperforms Switzerland Chart I-3When Technology Underperforms Healthcare, China Underperforms Switzerland Specifically, from a European stock market perspective, the Netherlands is overweight technology while Switzerland and Denmark are both overweight healthcare. Further afield, the U.S. is overweight technology while China is both overweight technology and underweight healthcare. Explaining Verticality And The Subsequent Fall What creates vertical charts? To answer the question, let’s turn it on its head: what prevents vertical charts? The answer is: the presence of value investors. In a healthy market, a cohort of value investors will sit on the side lines and only transact with the marginal seller when the price falls to a semblance of value. In other words, the value sensitive investors help to set the price, preventing verticality. But if the value sensitive cohort switches out of character to join a strong uptrend, the cohort will suddenly become value insensitive. In this case, the marginal seller will set the price higher and the formerly uninterested value sensitive buyer will now buy at the higher price. The market has morphed into a trend-following market. As more of the value cohort switch sides, the process adds rocket fuel to the rally. Driven by the ‘fear of missing out’ the marginal buyer will buy at larger and larger price increments, and the chart becomes vertical. What triggers the subsequent fall? When all of the value cohort have joined the uptrend, the fuel has run out: the marginal seller will no longer find a willing marginal buyer at the elevated price. At this critical point, one of two things will happen. Either: a completely new cohort of even deeper value investors will switch out of character and provide new fuel to the trend, allowing it to continue. Or: the deep value investors will stay true to character and will only deal with the marginal seller when the price falls, perhaps sharply, to a semblance of deep value. Technology versus healthcare is now at this critical technical point at which the probability of trend-reversal has significantly increased. Both the theoretical and empirical evidence suggests that at this critical point, the probability of trend-continuation decreases to about a third and the probability of a trend-reversal increases to about two-thirds. Technology versus healthcare is now at this critical technical point at which the probability of trend-reversal has significantly increased (Chart I-4). Chart I-4Technology Versus Healthcare: The Probability Of A Trend-Reversal Is High Therefore, on a tactical horizon, it is now appropriate to underweight technology versus healthcare – which, to reiterate, carries unavoidable consequences for country and regional stock market allocation: Open an overweight to Europe versus China. Upgrade Denmark to neutral. Downgrade the Netherlands to underweight. Maintain Switzerland at overweight. Distinguishing Between Valuation And Growth Is Extremely Difficult There is another problem for value investors. Over short periods – meaning less than a year – it is very difficult, if not impossible, to decompose a price return into its two components: the component coming from the change in valuation and the component coming from the change in earnings growth expectations. A stock market’s actual earnings are highly sensitive to small changes in economic growth. This is universally the case but is especially true in Europe, because the European stock market’s skew towards growth-sensitive cyclicals gives it a very high operational leverage to GDP growth: a seemingly minor 0.5 percent change in economic growth translates into a major 25 percent change in stock market earnings growth (Chart I-5). The slightest improvement in economic growth expectations causes the market to upgrade its forecasts for earnings very sharply. Chart I-5A Minor Upgrade To Economic Growth = A Major Upgrade To Profits Growth Given this very high operational leverage, the slightest improvement in economic growth expectations causes the market to upgrade its forecasts for earnings very sharply. Which of course lifts the market’s price, P, very sharply. In contrast, equity analysts’ forecasts for earnings, which drive the market’s ‘official’ forward earnings, E, adjust much more slowly. As my colleague, Chris Bowes explains: “analysts get married to a view and usually require overwhelming evidence to materially change it.” The upshot is that the P rises very sharply but the official forward E does not, meaning that the official forward P/E also rises very sharply. This gives the impression that the move is mostly valuation driven, but the truth is that the move is mostly earnings growth driven. In a similar vein, when central banks guide interest rates lower, how much of the equity market’s move is due to a higher valuation, and how much is due to improved prospects for economic growth resulting from the central bank policy change? Over relatively short periods of time, it is extremely difficult to tell. All of which provides an important lesson: over short periods, do not focus on separately forecasting the valuation change and earnings growth change of a stock market. Much better to forecast the stock market price directly, by focussing on the two main things which will drive it: changes to central bank policy, and changes to short-term real-time economic growth. Focus On Central Banks And Short-Term Economic Growth Central bank policy now ‘depends’ on relatively longer-term changes (say, year-on-year) in backward-looking data, most notably the consumer price index. Whereas the stock market’s earnings growth expectations take their cue from shorter-term changes in real-time economic indicators (Chart I-6). Chart I-6Quarter-On-Quarter Growth Is Rebounding Hence, the ‘sweet spot’ for equity markets is when, in simple terms, year-on-year CPI inflation is decelerating, implying central banks will become more dovish, while quarter-on-quarter economic growth is accelerating, implying the market will upgrade earnings growth (Chart I-7). The stock market’s earnings growth expectations take their cue from shorter-term changes in real-time economic indicators. The ‘weak spot’ for equity markets is the exact opposite, when year-on-year CPI inflation is accelerating, implying central banks will become less dovish, while quarter-on-quarter economic growth is decelerating, implying the market will downgrade earnings growth. As 2019 progresses, our high-conviction prediction is that equity markets will move from a sweet spot to a weak spot. With the Euro Stoxx 50 now up almost 20 percent from its January 3 low, it implies that the majority of 2019’s gains have already been made in the first four months of the year – and the market is unlikely to be significantly higher at the end of the year. Compared to the equity market, the bond, interest rate, and currency markets are – almost by definition – much more dependent on central banks’ lagging reaction functions than on real-time growth. Which solves the mystery as to why bond yields are close to new lows while equity markets are close to new highs. It also solves the mystery as to why EUR/USD has lagged the very clear recovery in euro area real-time growth and in euro area stock markets (Chart I-8). Central banks are following lagging indicators. Chart I-7Stock Markets Take Their Cue from Real-Time Indicators Chart I-8Central Banks Are Following Lagging Indicators, Stock Markets Are Following Real-Time Indicators But as the backward-looking data, on which the ECB depends, catches up with the more perky real-time data, core euro area bond yields will edge modestly higher, and EUR/USD will gently appreciate. Next week, in lieu of the usual weekly report, I will be giving this quarter’s webcast titled ‘From Sweet Spot to Weak Spot?’ live on Wednesday May 8 at 10.00 AM EDT (3.00 PM BST, 4.00 PM CEST, 10.00 PM HKT). Through a series of key charts, the webcast will reveal the prospects and opportunities for all asset-classes through the remainder of 2019. At the end of the webcast, I will also unveil a brand new investment recommendation. So don’t miss it! Fractal Trading System* Supporting the arguments in the main body of this report, fractal analysis suggests that the recent rally in China’s stock market is at a technical point that has reliably signaled previous major reversals. Accordingly, this week’s recommended trade is a stock market pair trade, short China versus Japan. Set the profit target at 2.5 percent with a symmetrical stop-loss. We now have six open positions. For any investment, excessive trend following and groupthink can reach a natural point of instability, at which point the established trend is highly likely to break down with or without an external catalyst. An early warning sign is the investment’s fractal dimension approaching its natural lower bound. Encouragingly, this trigger has consistently identified countertrend moves of various magnitudes across all asset classes. Chart I-9Short China Vs. Japan   The post-June 9, 2016 fractal trading model rules are: When the fractal dimension approaches the lower limit after an investment has been in an established trend it is a potential trigger for a liquidity-triggered trend reversal. Therefore, open a countertrend position. The profit target is a one-third reversal of the preceding 13-week move. Apply a symmetrical stop-loss. Close the position at the profit target or stop-loss. Otherwise close the position after 13 weeks. Use the position size multiple to control risk. The position size will be smaller for more risky positions.   * For more details please see the European Investment Strategy Special Report “Fractals, Liquidity & A Trading Model,” dated December 11, 2014, available at eis.bcaresearch.com.     Dhaval Joshi, Chief European Investment Strategist dhaval@bcaresearch.com Recommendations Asset Allocation Equity Regional and Country Allocation Equity Sector Allocation Bond and Interest Rate Allocation Currency and Other Allocation Closed Fractal Trades Trades Closed Trades Asset Performance Currency & Bond Equity Sector Country Equity Indicators Bond Yields Chart II-1Indicators To Watch - Bond Yields Chart II-2Indicators To Watch - Bond Yields Chart II-3Indicators To Watch - Bond Yields Chart II-4Indicators To Watch - Bond Yields Interest Rate Chart II-5Indicators To Watch - Interest Rate Expectations Chart II-6Indicators To Watch - Interest Rate Expectations Chart II-7Indicators To Watch - Interest Rate Expectations Chart II-8Indicators To Watch - Interest Rate Expectations