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INFLATION REBOUND ?Consumer Confidence vs INFLATION The Red Phase was the fall of the CC which lead the Inflation data fall. -> Of course, when consumers doesn't trust the market, spending fall. The Yellow Phase describes the effect of the CC falling: IF FALL. As leading indicator, the rebound of CC show the expansion which is represented by the Green Phase. -> As we can see, as soon as CC take points, the Inflation rebound too. Not like 2008, this time, CC took 30pts. ⚠️I envisaged a continuation of the fall of the Inflation data but a big chance of rebound in the Inflation. Moreover, the last seen consolidation of the inflation and the rebound of the CC at the pic of the Inflation is worrying. We see Strong Economic datas even showing signs of expansion. This delay between inflation and CC has not been that big during 2008. At the first rate cut there is a big chance of explosion of the Inflation as seen in 2006/2008 or pre-covid. ⚠️
ECONOMICS:USIRYYLong
by ThinkAboutIt75
Improved CPI, but Market Collapse – What is Happening?Just about 1.5 years ago, inflation reached the highest point in recent decades. The January inflation number for 2024 was released on February 13th. Its CPI has improved from 3.4% for December to 3.1%. However, the major US stock indices collapsed more than 1% on the same day. Why is there such nervousness surrounding improved inflation, and what are its implications? Mirco E-minin Dow Jones Futures & Options Outright: 1.0 index points = $0.50 Symbol code: MYM Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
ECONOMICS:USIRYYShort
by konhow
Macro Monday 20 ~ The Philly Fed IndexMacro Monday 20 Philadelphia Fed Manufacturing Index While the Philly Fed Manufacturing Index (PFMI) is a regional report generated from surveys in Philadelphia, New Jersey, and Delaware by the Federal Reserve Bank, it is particularly useful as it provides an advance indication of the Purchasing Managers’ Index (PMI) report which is released up to a week after the PFMI (the PMI surveys the entire US whilst the PFMI only surveys the regions mentioned above). The Philly Fed Index is released this Thursday 16th November 2023 and will provide an advance indication as to what to expect from the PMI released Friday 24th November 2023. Both are a review the prior months survey data, October 2023. The PFMI index dates back to 1968 and is similar to the PMI, the Federal Reserve completes surveys and asks businesses about new orders, shipments, employment, inventories and general business activity, prices paid, prices received, capital expenditures as well as future expectations for business. A reading= 0 is stagnation <0 = contraction >0 = expansion The current reading is -9 so we are contractionary territory. We did fall as low as -31.3 on the April 2023 release. The Chart The main indications from the chart are as follows: The Orange Zone ▫️ When the PFMI remains in the orange zone for >10 months it has always coincided with a Recession - We are in presently in this zone 16 months with 2 brief monthly jumps out of it. I think its safe to say we are 10 months+ in the orange zone which historically has always coincided with a recession. The Red Zone ▫️All Recessions confirmed a reading below -22 on the PFMI (this is below the red line into the red zone on the chart) - In April 2023 we hit a low of -31.3 which is well into the red zone (sub -22). We have since risen above the neutral 0 level to high of +12 in Aug 2023 however we have since fallen back down into the -13.5 (Sept) and -9 (Oct). The Nov Release is due this Thursday 16th Nov (and is actually the reading for Oct - released in Nov) Are we already in a mild Recession? You can see that in March 1970 we reached a similar PFMI level of -31.3, the same level as in April 2023 (there is a dashed red line to illustrate this on the chart). March 1970 was the middle of the 1969-70 Recession which was a mild recession that ran for 11 months from Dec 1969 – Nov 1970. Whilst it was a mild recession as to its impact on the general economy, there was till a 34% decline in the S&P500. The 1969-70 Recession has many similarities to some of our current economic predicaments, with the main factors leading to the 1970 recession being tighter monetary policy, rising oil prices, rising inflation, and slowing growth in Europe and Asia. Sound familiar? From Jan – Apr 2023 the Unemployment Rate was at the lowest levels seen since back in 1969 (at 3.4%). For 8 months (Sept 1968 – May 1969) the unemployment rate was down at 3.4%. We reached this level in January 2023 and oscillated there until April 2023 (only 4 months). Since then the Unemployment rate has risen sharply from 3.5% to 3.9% (July – Oct 2023). Interestingly, this move in the unemployment rate from 3.5% to 3.9% also happened from Dec 1969 to Jan 1970 and marked the start of the recession. Could this be an indicator that we stepped into a recession In July 2023? The orange zone and red zone on the chart are triggering a confirmation nod of a recession. During the recession of 1969-70 the unemployment rate topped at 6.08% in Nov 1970, this is something we have not seen yet however we seem to be trending upwards in that direction. Queue the 8th Dec 2023, the next Bureau of Labor Statistics Unemployment date release. The 1968-70 period was also burdened with high inflation with YOY CPI increasing from 2% - 6% in the 26 month period from Oct 1967 – Dec 1969. Similarly over a 25 month period from May 2020 – June 2022 CPI increased from 0% to 9.08%. The timeline of the 1969-70 inflation is quite similar, not exactly the same rate increase or timeline but similar all the same. Since June 2022 the CPI has come down to 3.7% as of Sept 2023. There are some broader similarities between the late 1960’s and early 1970’s to present day, the Vietnam war was raging and was receiving significant funding from the US government with many bills passed in support of the war effort. There was also significant poverty issues in the states as the war dragged on, and the awareness of money being spent on it was creating social discourse on the topic. Whilst the current situation of funding towards the Ukraine and Palestine conflicts is obviously very different, a similar awareness and disapproval is present as many domestic states are suffering with poverty. US President Johnson summarised the late 60’s quiet well in a 1966 speech stating that the nation could afford to spend heavily on both national security and social welfare — “both guns and butter”, as the old saying goes. Only in today’s circumstances only one of these seem to still be taking priority and it isn’t butter. I believe todays chart and post demonstrates a few things, that there is a high probability that we are already in a recession as of July 2023, however on a positive note the period we find ourselves in has many similarities to 1969-70 period, where the recession was a very bearable and mild one. With some luck, unemployment might top at 6.08% within 9 or 10 months like in 1970 and we will see a correction no greater than -34% on the S&P500 eventually. We already survived a 25% S&P500 decline from Dec 21 – Sept 2022. Minus 34% from our recent $4,580 high would put the S&P500 at approx. $3,000. Obviously there are no guarantees of any of these scenarios playing out, but at present we are certainly playing to the same tune as the 1969-70 period. PUKA
ECONOMICS:USPFMI
by PukaCharts
Also estimating GB IR going down :)Esteemed colleagues and discerning investors, As we gather to deliberate on the trajectory of our financial endeavors, let us turn our attention to the chart that unfolds before us. This graph is not merely a collection of lines and oscillations—it is the pulse of the market, the heartbeat of commerce, the very rhythm of our economic aspirations. Observe the vibrant fluctuations, the ebb and flow of value that defies the flat line of stagnation. Here we see a recent descent, a modest humbling from previous heights, which speaks to the cautious prudence that underlies our most strategic decisions. The red and green arrows, much like the hands of a compass, point to a divergence in paths, a moment of decision. The red arrow, descending sharply, may initially stir a flutter of concern, a hint of the bearish sentiment that tempers exuberance with sobriety. Yet, juxtaposed with this is the green arrow, ascending with the promise of recovery, a bullish rejoinder that whispers of resilience and potential. In this oscillation, encapsulated by the serene waves of the indicator below, we find the true test of our mettle. It is a siren call to the savvy, to those who can read between the peaks and troughs and discern the opportune moment to act. This prediction, cast upon the waters of future markets, is a vessel laden with our collective wisdom. It charts a course that acknowledges the inevitable storms and celebrates the prevailing winds that propel us forward. Let us then approach this forecast with the gravity it deserves, yet also with the optimism that has long been the hallmark of our shared ventures. For it is not just a potential decline that we prepare for, but also the ascent, the rally, the triumphant climb from the valley to the mountaintop. In closing, may this chart serve as a beacon, guiding our investments with the twin lights of caution and opportunity. May our decisions be crafted with the precision of the master artist, turning the canvas of unpredictability into a masterpiece of profit and progress. Thank you.
ECONOMICS:GBINTRShort
by UhXeL
Hope the house prices go down like this :)Powered by IA :) Ladies and Gentlemen, Today, we stand at the precipice of potential and possibility. The image before us, a chart that speaks in the language of peaks and valleys, offers us a glimpse into the future, a prediction not taken lightly. What we see is a story of growth, a narrative of ambition traced along the upward trend of this price channel. The slopes of this graph are not just lines but the embodiment of human endeavor and market forces, intertwined in a dance of numbers and dreams. As the blue line ascends within the bounds of the channel, we're reminded of the resilience and adaptability that are hallmarks of our financial markets. The channel's support and resistance lines serve as a testament to the natural ebb and flow of prices, reflecting both exuberance and caution. Yet, here we are, at the zenith of the channel, where the price hovers with anticipation. The arrow, pointing downwards, may signify an impending change, a shift that whispers of cycles and seasons in the economic sphere. It suggests a time to pause and reflect, to consider the gravity of decisions and the weight of consequences. This prediction, while rooted in analysis and expertise, also holds within it the unknown. It is a reminder that while we can chart a course through the seas of market speculation, the waters are ever-changing. As we embark on the journey ahead, let us do so with vigilance and wisdom, drawing upon the rich tapestry of data that guides us. May our strategies be sound, our risks calculated, and our spirits undeterred by the tides of uncertainty. In closing, let this price prediction serve not as a crystal ball, but as a compass — guiding us through the markets with informed perspectives and a steady hand. Thank you.
ECONOMICS:GBHPIShort
by UhXeL
Exploit the inflation response?In the United State's history of inflation, we can observe a specific pattern anytime the inflation rate spikes. First in 1935, and again in 1969. Each time this happened we saw two additional spikes each about 4.5-5 years apart. Given the recent spike in inflation in 2022, we may again see another two additional spikes in inflation. One around 2027, and another around 2032. Thanks to the recent spike, we were able to observe first hand how the market reacts to the policy response on inflation which is to increase rates. Further - it is likely that when the market reacts unfavorably to the increase in rates, it will bottom out in approximately 10 months like it did in October of 2022 meaning we will be able to have an idea of when to go stop shorting and enter long positions. TLDR: market should pump til' like 2027 all things held constant xD.
ECONOMICS:USIRYY
by The_Gains
1
Wilshire 5000 - approaching a decision point.The Wilshire 5000 is basically the broad market literally every publicly company in the America and also some foreign corporations are incorporated in this index We are coming to a decision area, not right now. But over the course of the next few months and years. We could see a breakout up and a continuation of the ever uptrend or a breakdown, and change in longterm trend Since these numbers are denominated in ever worthless dollars betting up with periods of panic has forever been the right call. Place your bets accordingly.
FRED:WILL5000PR
by BallaJi
Assessing The Inflation Outlook: Not Yet Out Of The WoodsInflation, naturally, remains the topic at the forefront of the minds of both market participants and policymakers alike. As price pressures continue to fade, and the majority of developed economies enter the ‘last mile’ of prices returning to target, whether the immaculate disinflation seen to date can continue, or whether the inflationary beast may yet still have a sting in its tail. First things first, it’s important to recognise the progress that has been made across DM in restoring a level of price stability. Having peaked around, or north of, 10% in the second half of 2022, the most rapid policy tightening cycle in four decades, coupled with the fading of supply-driven price pressures due to pandemic-related distortions, has seen headline price measures more than half in the subsequent 18 months. However, as is clear in the above chart, progress has somewhat stalled over the last quarter or so – longer Stateside – with headline inflation having begun to stabilise at still-elevated levels. While a substantial chunk of this is due to a recent resurgence in energy prices, allowing core (ex-food and energy) price measures to continue to decline, this lack of further disinflationary progress at the headline level is likely to be of increasing concern as time goes on. Before examining where risks to the inflation outlook lie, it’s key to acknowledge that the progress made thus far in restoring price stability has been ‘immaculate’, i.e. not coming – as many, including I, had expected – at the cost of a sharp deterioration in economic growth, or a significant loosening in global labour markets. In fact, it was notable how, at the January FOMC press conference, Chair Powell noted that stronger growth is no longer seen as a problem, and that the Fed are ‘not looking for a weaker labour market’. These comments were both in rather sharp contrast to Powell, and the FOMC’s, previous stance that a period of ‘below-trend growth’ would be needed in order to bring inflation towards target. As with the prior, pre-covid cycle, evidence would suggest that the Phillips curve remains essentially flat. Despite all that, DM economies remain far from ‘out of the woods’ on the inflation front. While, as discussed, headline price gauges have made substantial progress towards target, it is important to recognise that much of this progress has come as a result of goods disinflation, as services prices have remained relatively ‘sticky’ at elevated levels. This is true of the US. While also being true of inflation here in the UK. This points to an interesting dynamic over coming months. With economic momentum showing little sign of waning, particularly in the US, and labour markets set to remain tight, all signs point towards consumer spending remaining resilient. Such resilience should maintain upward pressure on services prices, particularly when considering that the lagged impacts of prior tightening appear less detrimental than had been feared, with effective mortgage rates in the US remaining below 4%, having risen just 50bp during the hiking cycle. At the same time, the risks of a resurgence in goods inflation remain elevated, most notably as a result of continued, and escalating, geopolitical tensions in the Middle East, causing numerous shipping firms to avoid the Red Sea, resulting in a substantially longer – and more expensive – journey around the Cape of Good Hope. Benchmark container rates from China to Europe have already quadrupled since the turn of the year, a price rise that is likely to feed along the value chain, with question marks persisting over the ability of firms to absorb these costs. January’s ISM PMI surveys provided an important reminder that price pressures remain within the economy. For the manufacturing sector, the prices paid gauge printed north of the 50 mark – implying an MoM increase – for the first time in nine months, while the comparable services gauge rose to 64.0, its highest in almost a year. The potential dynamic here is such that services inflation remains sticky, at the same time as goods inflation makes a resurgence due to a rise in shipping costs, thus exerting significant upward pressure on overall headline inflation. Of course, such a dynamic is unlikely to impact all DM economies equally, with the eurozone substantially more exposed than others; incidentally, posing a conundrum for the ECB, who are also grappling with an increasingly sick German economy, and anaemic economic growth. More broadly, for policymakers, these upside inflation risks point to the easing cycle beginning later than markets currently foresee, even after the hawkish repricing that has been seen since the start of the year. This is due to a likely desire to err on the side of caution, and maintaining restrictive policy for too long, as opposed to easing prematurely. Such a mentality seemingly stems from two sources. Firstly, continued scarring from the experience of dismissing price pressures as ‘transitory’ during 2021, and the subsequent erosion of credibility caused once forced into a rapid tightening cycle. And, secondly, a desire to avoid a ‘stop-start’ easing cycle, whereby it becomes necessary to hit pause on rate cuts for a period or, worse, re-tighten policy due to a resurgence in inflation. For markets, this all points to the hawkish repricing of rate expectations continuing, posing a downside risk to fixed income in the process, particularly in locales – such as the US – where growth is also holding up substantially better than consensus expected. That dynamic should also see upside USD risks persist, particularly against G10s where earlier cuts are likely, namely the EUR, the CHF, and the NZD.
ECONOMICS:USMPR
by Pepperstone
The Business Cycle is turning up ISM Services PMI Rep: 53.4% ✅ HIGHER THAN EXPECTED ✅ Exp: 51.7% Prev: 50.5% (revised down marginally from 50.6%) The reading for ISM Services PMI came in much higher than expected with services remaining in expansionary territory for Jan 2024 (>50 Level) Whilst ISM Manufacturing PMI came in at 49.1 on the 1st Feb (<50 level) and in contractionary territory, it has made a higher low much like Services PMI. Manufacturing has increased from 46 in July 2023 to 49.1 currently. Services continues to outperform Manufacturing. Both Services and manufacturing appear to be making a series of high lows on the chart which may suggest that this business cycle is starting to turn and curl to the upside. PUKA
U
by PukaCharts
Quantitative Support in the US1. Liquidity and Investments: An increase in M2 typically means there is more liquidity in the economy, as consumers and businesses have more cash or cash-equivalents at their disposal. This excess liquidity can lead to increased investment in stocks, including those in the S&P 500, driving up stock prices. 2. Economic Expectations: A growing money supply can signal that central banks (like the Federal Reserve in the United States) are implementing looser monetary policies, often in response to concerns about economic growth. Lower interest rates and other forms of monetary stimulus can encourage borrowing and investing, leading investors to buy stocks in anticipation of economic recovery or growth, which can push up stock market indices like the SPX. 3. Inflation Expectations: Over the long term, increases in the money supply can lead to inflationary expectations. If investors believe that inflation will rise, they might choose to invest in assets like stocks, which are seen as a hedge against inflation, because companies can raise prices to maintain their revenues and profits in nominal terms. This shift can drive up stock prices, including those in the S&P 500. 4. Risk Appetite: An expanding money supply can also affect investor sentiment and risk appetite. With more money available and potentially lower returns from traditional safe investments (like savings accounts or bonds, which might offer lower interest rates when the money supply is growing), investors may turn to the stock market in search of higher returns, driving up equity prices. S&P can go higher, this depends on the FED Golilocks continues. The economy is not going to crash, why? It's already happened. We had a GFC. Go to university and do any relevant classes to macroeconomics. You will at some point discuss, or study the GFC. This is so we does not happen again. Of-course nothing is going to go terrible during a US election year. Now this does not stop black swan events...
ECONOMICS:USM2Long
by BackQuant
1
SLOOS Banking Lending Conditions- Released Monday 5th Feb 2024 Please review my prior post for a more detailed breakdown Released quarterly, the Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) is a survey of up to 80 large domestic banks and 24 branches of international banks to gain insight into credit, lending and bank practices. The Federal Reserve issues and collates the voluntary surveys. The surveys generally include 25 questions and a number of special questions about development in banking practices. They cover practices for the previous three months, but also deal with expectations for the coming quarter and year. While some queries are quantitative, most are qualitative. The surveys have come to cover increasingly timely topics, for example, providing the Fed with insight into bank forbearance policies and trends in response to the 2020 economic crisis. Let’s have a look at the culmination of the some of the more important data in chart form The Chart The blue line on the chart plots the results of the SLOOS survey – specifically, the net percentage of polled banks reporting that they’ve tightened their lending standards to commercial and industrial customers. The other lines are specified on the chart and are self explanatory . PUKA
FRED:DRTSCILM
by PukaCharts
MACRO MONDAY 32~The SLOOS~ Is Lending Increasing or decreasing?MACRO MONDAY 32 – The SLOOS Released Monday 5th Feb 2024 (for Q4 2023) Released quarterly, the Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) is a survey of up to 80 large domestic banks and 24 branches of international banks to gain insight into credit, lending standards and bank practices. The Federal Reserve issues and collates these voluntary surveys. The surveys generally include 25 questions and a number of special questions about development in banking practices. They cover practices for the previous three months, but also deal with expectations for the coming quarter and year. While some queries are quantitative, most are qualitative. The surveys have come to cover increasingly timely topics, for example, providing the Fed with insight into bank forbearance policies and trends in response to the 2020 economic crisis. Let’s have a look at the culmination of the some of the more important data from the SLOOS in chart form The Chart The blue line on the chart plots the results of the SLOOS survey – specifically, the net percentage of polled banks reporting that they’ve tightened their lending standards to commercial and industrial customers. I have combined the SLOOS Tightening Lending Standards on the chart with the Unemployment Rate. You can clearly see a pattern of the SLOOS leading the Unemployment Rate and also the broad correlation of their trends. Recessions are in grey. The SLOOS Tightening Lending Standards (blue line) ▫️ Lending standards tightened significantly prior to the onset of each of the last three recessions (See green lines and text on chart). ▫️ When lending conditions tightened by 54% or greater it coincided with the last four recessions. (Represented by the horizontal red dashed line on the chart and the red area at the top) ▫️ On two occasions the 54% level being breached would have been a pre-recession warning; prior to the 1990 recession and 2000 recession providing approx. 3 months advance warning. ▫️ When we breached the c.34% level in Jan 2008 it marked the beginning of that recession. We are currently at 33.9% (for Q3 2023) and were as high as 50% in the reading released in July (for Q2 2023). Above the 34% on the chart is the orange area, an area of increased recession risk but not guaranteed recession. ▫️ Interestingly, every recession ended close to when we exited back out below the 34% level. This makes the 34% level an incredibly useful level to watch for tomorrows release. If we break below the 34% level it would be a very good sign. We could speculate that it could be a sign of a soft landing being more probable and could suggest a soft recessionary period has already come and gone (based solely on this chart continuing on a downward trajectory under 34%). I emphasize “speculate”. U.S. Unemployment Rate (Red Line) ▫️ I have included the U.S. Unemployment Rate in red as in the last three recessions you can see that the unemployment rate took a sudden turn up, just before recession. This is a real trigger warning for recession on the chart. Whilst we have had an uptick in recent months, it has not been to the same degree as these prior warning signals. These prior stark increases were an increases of approx. 0.8% over two to three quarters. Our current increase is not even half of this (3.4% to 3.7% from Jan 2023 to present, a 0.3% increase over 1 year). If we rise up to 4.2% or higher we can start getting a little concerned. ▫️ The Unemployment Rate either based or rose above 4.3% prior to the last three recessions onset. This is another important level to watch in conjunction with the 34% and 54% levels on the SLOOS. All these levels increase or decrease the probability of recession and should infer a more or less risk reductive strategy for markets. In the above we covered the Net percentage of Banks Tightening Standards for Commercial and Industrial Loans to Large and mid-sized firms. The SLOOS provides a similar chart dataset for Tightening Standards for Small Firms, and another similar dataset for Consumer Loans and Credit Cards. I will share a chart in the comments that illustrates all three so that tomorrow we can update you with the new data released for all of them. You are now also better equipped to make your own judgement call based on the history and levels represented in the above chart, all of which is only a guide. Remember all these charts are available on TradingView and you can press play and update yourself as to where we are in terms of zones or levels breached on the charts. Thanks for coming along again PUKA
FRED:DRTSCILM
by PukaCharts
Further Thoughts On A Flexible FOMCAs the dust continues to settle on the FOMC’s first policy decision of the year, and calmer heads prevail after the market choppiness of Wednesday as Chair Powell was speaking, the Committee’s actions, and Powell’s press conference, appear increasingly intriguing and, to give credit where it’s due, clever. Firstly, as markets had expected, the dovish pivot that begun in December – with the inclusion of the word “any” to frame potential further policy tightening – continued, as the Committee shifted guidance to describe future “adjustments” to the target range for the fed funds rate. Clever – signalling to markets that the next move is likely to be a cut, but not going all the way to say so explicitly, while also leaving the door open to a renewed tightening in policy, or at least a more hawkish bent to Fedspeak and delayed easing, were upside inflation risks to emerge. Then, at the press conference, eventually, Powell conceded that a March cut was “not the base case”, even as markets had assigned a greater-than-even chance of the Fed firing the starting gun on the easing cycle at that meeting. Again, clever – pushing back on market rate expectations, to keep financial conditions tight(ish) and bear down on inflation, but providing optionality to cut at that meeting if the economy were to evolve in a poorer way than currently foreseen. On which note, Powell did outline some conditions under which cuts may come sooner than the base case expects – ‘unexpected labour market weakening’ is one, placing greater emphasis than usual on the 2 jobs reports between now and the March FOMC, while financial stability concerns will likely be another. Once more, intelligent policy – giving markets a hint of what the Committee will be paying most attention to in the realm of downside economic risks. Clearly, policy optionality remains the ‘name of the game’ for the FOMC, as was also shown by Powell’s remarks on inflation, in refusing to be drawn on either a level that inflation must reach, or how many more months of disinflationary data the Committee want to see, before cutting rates. Again, clever policy, whereby policymakers – assuming the now-embedded disinflationary trend continues – can, reasonably, at any stage, point to now having enough data to confirm that inflation is sustainably on its way “towards” 2%. That “towards” is important, implying that policymakers are not seeking a particular price measure to dip under the 2% handle. Instead, just needing to be sure that inflation is on its way there, and will stay there, even if policy is made less restrictive via rate cuts. This all leads to a number of conclusions: • This is a flexible FOMC. It is one where policymakers are likely to have the option to cut, and begin the easing cycle, at any point over the next 12 months. It will likely only begin when, and only when, policymakers are convinced that easing will not undo the hard yards of the last two years of rate hikes, and risk a resurgence in price pressures. Powell & Co., as yesterday’s pushback on March cut pricing showed, shan’t be bullied by financial markets • The experience of 2021/22 is still fresh in the Fed’s mind. Policymakers likely remain scarred by having dismissed price pressures as ‘transitory’, only to then need to embark on the fastest tightening cycle in four decades. This will likely lead to the FOMC erring on the side of caution, preferring to stay restrictive for too long, then easing more rapidly, as opposed to easing sooner, and potentially having to pause – or even U-turn on – a cutting cycle • The FOMC are purely data-dependent. If inflation becomes stickier, cuts will be postponed; if the labour market rolls over more rapidly, cuts will be brought forward. The data will inform all as to the likely course policy will take, with the overall trend of said data being substantially more important than one or two individual prints. Market reaction to downside data surprises will be particularly interesting, given the Pavlovian-esque conditioning most participants have undergone to expect a cut as soon as one bad print crosses newswires. As noted above, policymakers will be loathe to overreact to negative news, unless and until it becomes a trend • March is either a nothingburger, or a big cut. Though there are still 6 or so weeks until the next FOMC, it’s relatively obvious that it will lead to rates remaining unchanged, perhaps with a further nod towards easing at the May meeting, or result in a significant cut to the fed funds rate, as a result of dramatic (& unexpected, at this juncture) labour market weakness, significant financial stability concerns (e.g. regional banks/CRE), or another unforeseen black swan event. Were goods inflation to reaccelerate, as services prices remain sticky, the same scenario could also easily pan out at the May meeting, though there is clearly a long way to run before then
FRED:DFEDTARU
by Pepperstone
U.S. Continuing Jobless Claims (Updated Chart & Release)U.S. Continuing Jobless Claims Rep: 1,806k ✅Lower Than Expected ✅ Exp: 1,845k Prev: 1,832k (revised down from 1,834) Whilst the short term lower than expected continuous jobless claims are welcomed the long term trend is one of thee most concerning charts out there. Chart Trend Since Sept 2022 continuing claims increased from 1.302m to 1.806m (500k+). This is significantly concerning trend and suggests that an increasing number of people that become unemployed are remaining unemployed for longer. Recession Watch The chart below has min, avg and max levels on the bottom right to illustrate the levels we would need to hit for increased recession risk. Right now this chart demonstrates we are at max timeframe and close to max levels for an advance recession warning. What are Initial and Continuous claims? Initial Jobless Claims account for only the people that claimed their first week of unemployment benefit whilst Continued Jobless Claims accounts for people who continued to seek their unemployment benefit into week 2 and subsequent weeks. Next up, Philly Fed Manufacturing Index 💪🏻
ECONOMICS:USCJC
by PukaCharts
Macro Monday 31 ~ Dallas Fed Manufacturing Index (Key Levels)Macro Monday 31 U.S. Dallas Fed Manufacturing Index This Index is compiled from a monthly survey conducted by the Federal Reserve Bank of Dallas to assess the health of manufacturing activity in the state of Texas. It provides insight into factors such as production, employment, orders, and prices, offering a snapshot of economic conditions in the region. Why is the Dallas Fed Manufacturing Index Important? ▫️ As stated above the index covers manufacturing activity in the state of Texas, the state of Texas ranks 2nd only to California in factory production & comes in at 1st as an exporter of manufactured goods, thus Texas is an important state for gauging manufacturing & production in the U.S. economy. ▫️ Texas also contributes an incredible c.10% towards the U.S. Manufacturing gross domestic product making the index an important metric to consider towards potential GDP trends in the U.S. ▫️ The Dallas Fed Manufacturing Index (DFMI) is one of several regional manufacturing surveys that feed into the national Purchasing Managers Index (PMI). The PMI is released later this week on Thursday 1st Feb thus the DFMI on Monday will give us an early indication of the potential direction of the PMI later in the week. FYI, I will be covering the PMI for you on Thursday so stay tuned for that. How to read the index? A reading above 0 indicates an expansion of the factory activity compared to the previous month; below 0 represents a contraction; while 0 indicates no change. The Chart The chart only dates back to 2005 so we have a limited dataset however we can still see definitive levels of importance and trends over this shorter historic backdrop. A few findings from the chart: The + 36.8 Level Since December 2005 any time we have hit the +36.8 level on the chart it has typically represented a peak in manufacturing and production signaling that a decline would likely follow. This has occurred 3 times and each time within 20 – 23 months of this +36.8 peak we had a recession or a financial crisis. 1) December 2005 21 Months later we had the Great Financial Crisis. 2) June 2018 20 months later we had the COVID-19 Crash. 3) April 2021 23 months later the U.S Banking Crisis occurred in March 2023 resulting in 3 small to mid size banks failing. - The remaining banks being saved by the Bank Term Funding Program (BTFP) which appears to have successfully contained the contagion for now. The BTFP is ceasing in March 2024 👀 ▫️ We can see above that in the event we reach the +36.8 level in the future, history informs us that within 20 – 23 months major economic issues will likely present. If we had known this back in April 2022. After April 2022 the S&P500 fell 15% to its recent lows. ▫️ The National Bureau of Economic Research (NBER) could declare the current period we are in as a soft recession. For the last six recessions, on average, the announcement of when a recession started was declared 8 months after the fact meaning we will would only get confirmation of a recession once we are 6 - 8 months into it. Its worth noting that some recessions were confirmed by the NBER after the recession was over. - 36.8 Level A reading below the -36.8 level has historically confirmed a recession. We have not hit this level since the COVID-19 Crash with May 2020 being the last time we have been at this level. Periods in Contractionary Territory There have been 2 previous periods where we have remained in contractionary territory for greater than 6 months. These are worth reviewing as we have been in contractionary territory for the 20 months now (April 2022 - Present). 1) Sept 2007 – Nov 2009: We fell into contractionary territory during the Great Financial Crisis for 26 months. From 2009 to 2016 the index seemed week oscillating around the 0 level and not really breaking out into persistent expansionary territory until 2017 forward. 2) Jan 2015 – Oct 2016: We fell into contractionary territory for 21 months however there was no recession. 3) Apr 2022 – Present: We are currently on month 20 of contraction. Now this could be just like point 2 above whereby we recover to expansionary territory in month 21 or 22 (Jan - Feb 2024) however if we do not, we are moving towards a timeline similar to point 1 which was the 26 month Great Financial Crisis. Q1 of 2024 will be very revealing in terms of what we can expect next. In the event we end up in contraction for 26 months or if we hit the -36.8 level we can presume, based on history, that we likely have a recession on our hands. And, if we recover into expansionary territory maybe we have got away with it this time 🙂 You can clearly see that the Dallas Fed Manufacturing Index is significant for assessing the U.S. economy because it provides timely insights into the health of one of the nation's key economic sectors: manufacturing & production. Since Texas is a major hub for manufacturing activity, trends observed in the Dallas Fed index can offer valuable indications of broader economic trends. It is one of several regional indices that contributes to a comprehensive understanding of the manufacturing landscape, aiding policymakers, investors such as ourselves, and businesses in making informed decisions about the state of the economy. The current economic environment just gets more and more interesting every week Thanks for coming along again folks 🫡 PUKA
ECONOMICS:USDFMI
by PukaCharts