Inflation

ポストCOVIDの景気拡大を支えた景気刺激策は5年を経て勢いを失い始め、経済は自然に発生する景気後退の方向に向かっていました。DOGEと多方面にわたる貿易戦争がそのタイムテーブルを前倒しした今、我々は改めてリスクオフの推奨を表明します。

Tariffs will make a difficult job almost impossible. Hitting and sustaining a precise 2 percent inflation target is more about luck than judgement. It requires both the starting point for inflation expectations and any inflation/deflation shock to combine perfectly to 2 percent. While structural inflation expectations in the euro area and Japan could be close to 2 percent, those in the US and the UK will be stuck uncomfortably above 2 percent. We discuss the investment implications for rates and FX. Plus: gold is vulnerable to a tactical reversal.

The US economy has never entered a demand-driven recession without labour demand running below labour supply and without the job vacancy rate running below the unemployment rate. Right now though, US labour demand is still running 1.7 million workers above labour supply, and the job vacancy rate is running comfortably above the unemployment rate. This suggests that the labour market is still supply-constrained, and that a demand-driven recession is not imminent. We discuss the investment implications. Plus, more about our ‘trade of the century’: long cotton versus coffee.

This week, our three screeners cover equity plays for “transitory” inflation impacts from US tariffs, a correction in sentiment within the European Aerospace and Defense industry, and Value Investor, Warren Buffett’s Philosophy.  

A falling stock market and sticky bond yields represent the worst of both worlds for investors. We interrogate why bond yields haven’t dropped more given the large selloff seen in equities.

Some thoughts on this morning’s CPI report and its implications for the Fed and Treasury yields.