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Economy

Master of MarketsIn 2008 the U.S. central bank purchased  $1.25 trillion in mortgage-backed securities $200 billion in agency debt $300 billion in long-term Treasury securities 2008 was named QE1 and would continue for the next 6 years before the FED paused and eventually began to tighten. During times of QE, banks, companies, markets all perform great. There is plenty of liquidity to operate, margin is cheap. When the fed tightens, markets get volatile. Margin becomes expensive. Most companies will survive this volatility. They just pass the cost on to the consumer. This creates inflation. Sticky inflation. Fed has to tighten more to fight inflation. At this point it’s all they can do. But they risk crashing the markets. The fed controls just how much air is let out and how fast. That’s why you saw Jay Powell start with easing, into light QT and now in September the amounts they will be selling are very likely to put more down pressure on the markets. Just realize the FED can manage the market pressure, it’s the unexpected events during times of low liquidity and high volatility that concerns me. See the effects of Net liquidity on VIX over the past 15 years. Never reaching above 30 except during extreme events like the flash crash and china crash.. You can see we’re in a time of extreme volatility as clusters of volatility reaching over 30 4 times since Nov 2021. What is Net liquidity? Net liquidity is a formula I found on Fintwit that is supposed to predict the markets movements 2 weeks in advance. I don’t know if I believe that, but I did some Covariance analysis and there are certainly times during QE with high bullish correlation and QT there is high bearish correlations. To determine Net Liquidity you need to take The total assets of the Federal Reserve Balance sheet at 8.8 Trillion. Subtract The Treasury General Account at 617 Billion Then Subtract the 2.1T Overnight Reverse Repo You get 5.9 Trillion in Net Liquidity. Changes in the level of Net Liquidity (step up or step down) are claimed to predict the S&P 500 direction 2 weeks in advance. The claim is that of a 95% correlation since the transitory quantitive easing and reverse repo were implemented. I was curious to see if the claims were true. More on that tomorrow.
FRED:RESPPANWW
by SPYvsGME
7
Housing Market at a glance: Be very afraidThe amount of houses on the market and the death of Mortgage Backed Securities seems to be the elephant in the room once again, like 2008. Nobody is talking about it. Pundits dismiss it, cause "we had tighter loan requirements for 0% mortgages"; yeah and no anks want to hold those low-yield mortgage,s as the $SPMB chart shows. They'd rather buy your house back from you for half price after the crash. Get ready folks, it's about the get ugly fast.
FRED:MSACSR
by Nicklaus68
3
$Dxy $Usd #Cpi MTF TOPPED.This count is based on my assumptions so anything can happen not a trading or financial advice just for educational purposes only kindly do your own ta thanks trade with care good luck. Tip: If it happens to be the top. Let's just assume for a moment. Then this means.. If cpi goes down = fed rate goes down Fed rate goes down = dxy goes down Usd goes down = gold, btc, eur, jpy, chf, aud, nzd, silver all go up. Why? Well it's my assumption but inflation is too high for which fed raises rates. Cpi is what makes fed decide whether it's gonna raise or not anymore (cpi higher fed raises rates). If cpi is topped then I don't think the fed rate hike would make any difference in the market because this would be it's final and since (I believe) the market has made it's move already and as you can witness charts having supports on MAJOR tfs I don't think the raise in fed would make much difference or may do the opposite because it's what makes the cpi react that means cpi lags that means fed may not raise the rates as we have topped. Cpi what we have seen today was of AUGUST!!!!!!!!!!!! So.. Even if the fed raises rates. Then the market would already have moved by then means no reaction because it was already anticipated (or as they say.. Buy the rumors!!!!!!! Sell the Nooz!!!. The news? Fed is gonna raise the rates. Anticipation? No surprise, (rate hike anticipated by 0.75 bps !! The market has already been moving as per the anticipation. Cpi? Of course would FALL. Means what happens AFTER that? No more raises!!! (My assumptions). No raise? Reaction? Bonds go up yield goes down usd dxy goes down jpy eur gold silver btc goes up. Good luck.
ECONOMICS:USCCPIShort
by alibadshah88
US03MY increases more, Markets surprised at CPI data !?😲CPI the Core inflation, which is the focus of most traders, rose 0.6 percent in August, a larger increase than in July. Although the US inflation decreased in August; But it was still higher than economists had expected, signaling that the US Federal Reserve will remain aggressive in raising interest rates. Also Eight days before the new Federal Reserve interest rate meeting, the 3-month bond yield has increased by 0.75% in the transactions so far. After announcing the inflation data, the yields of government bonds with different maturities increased by +6%. The point being that the 3month is highly correlated to the federal funds rate, It seems ,the Federal Funds Rate continues to rise , likely at a more modest pace and maybe with less regularity. ------------------------------- Bond Yields: The yield on a government bond is the interest rate that the government borrows at. Government bonds, because they are safe, therefore tend to have a lower yield because investors are not demanding a high rate of interest for lending to the government. Bond yield is the return an investor realizes on an investment in a bond. A bond can be purchased for more than its face value, at a premium, or less than its face value, at a discount . The current yield is the bond's coupon rate divided by its market price. Price and yield are inversely related and as the price of a bond goes up, its yield goes down. ------------------------------- This Economic informations update is provided for informational purposes only . ✌️ Good luck with your trading and investing and remember: Trade smart…OR JUST DON’T TRADE! -------------------------------------------------------------------------------------------------------------------- 👉This analysis is my personal opinion ,not a financial advice ,so do your own research. 💚 if you're fan of my analyses please follow me , drop a comment 🗯 and Boost me 🚀🚀
FRED:FEDFUNDS
by PRO_SMART_Trader
13
Has inflation really peaked? Not so sureWe have been inside this green triangle since 1915. The downtrend line has been tested a few times and this is the first year it actually went past it and recently came down for a retest. Hard to feel like inflation has peaked also considering oil is still in an uptrend and the Fed couldn't have been more hawkish in the last Powell's speech, so we may be up for a rough surprise in tomorrow's CPI report. The Fib retracement points at a possible 12.50-13.00% inflation read, let's see what we get.
ECONOMICS:USIRYYLong
by NightCommando
Bear markets don't last as long as Bull marketsSince we last discussed the odds of a recession here, the prospect of a recession has become consensus. The issue that remains under scrutiny is the duration and intensity of the recession. The slide in stock markets has destroyed nearly US$35trn of global wealth in H1 2022. In terms of timing, the European economy is headed for a recession by year-end, while the US economy could enter a recession by the end of Q1 2023. A mild recession is expected in the US, whilst in Europe, the intensity of the recession will depend on how the energy crisis is managed. US – Fading the Federal Reserve (Fed) The US economy is showing signs of growth slowing and inflation peaking. While Gross Domestic Product (GDP) dropped for two consecutive quarters, Gross Domestic Income (GDI) rose in Q1, and real personal income ex-transfer payments increased in Q2. This increases the likelihood of a stronger GDI print in Q2. More importantly, history has shown that the gap between GDP and GDI tends to be closed, with GDP being revised closer to GDI. The labour market remains strong as jobs continue to be added, wages accelerate, and unemployment remains at a five-decade low. The decline in headline Consuer Price Index (CPI) inflation from 9.1% to 8.5% was a welcome relief to markets. The Federal Reserve path has repriced notabley since the release of the CPI report, with the terminal rate down to 3.55% from 4.25%. While inflation data cooled across non-core and core components, cyclical components like shelter remain elevated. This CPI print validates the case for a 50 basis points (bps) rate hike in September and further moderation going forward (lower than 75bps rate hikes going forward). US Q2 earnings reports have surprised on the upside, with consensus earnings expectations for the year to the June quarter rising from 5% a month back to 8.77%. It is well documented that yield curve inversions always lead to a recession. Interestingly market performance following the inversion has generally been positive. Since the most recent yield curve inversion in June, equities have rebounded similar to scenarios witnessed in the past. Europe’s recession will go hand in hand with higher energy prices Europe’s economy continues to face headwinds from the ongoing energy crisis. Inflation and growth risks have increased further. The Eurozone economy avoided a technical recession in Q2 as GDP rose more than expected by 0.7% Quarter on Quarter (QoQ). However, the growth outlook remains bleak amidst the energy crunch. Russia has weaponised energy and food supply owing to Europe’s deep dependency. The Euro area is contending with an energy-shock and inflation far greater than in the US. With energy prices, up 42% Year on Year (YoY) in June 2022, energy contributed to more than half of the 8.9% YoY inflation reading in July. Complicating matters further, the Rhine River a pillar of the German, Dutch and Swiss economies for centuries — is set to become virtually impassable at a key waypoint owing to extremely shallow water levels. This will likely halt shipments of energy products and other industrial commodities along one of Europe’s most important waterways1. A prolonged heatwave could create delays for winter energy supplies at a crucial time for Europe. In the near term, the European Central Bank (ECB) will likely focus more on current inflation than on recession risks. As a result, the ECB will front load rates by 50bps on the 8th of September, followed by 25bps moves on the 10th of October and 15th of December. Growth risks in China imply further policy stimulus China’s economy continues to disappoint in 2022. China’s Q2 real GDP growth decelerated sharply to 0.4% YoY from 4.8% in Q1, owing to the covid wave and lockdowns since March. While June activity showed signs of a broad-based improvement post lockdown, the growth headwinds have not gone away entirely. The property market turmoil continues to tarnish sentiment with new emerging risks ranging from mortgage payment strikes and declining home sales in July. Fortunately, more effective policy easing is still needed to underpin growth and support demand challenges. Defensive but not too defensive Markets like to stay one step ahead. They do not react to the news as much as they anticipate it. ‘Buy the rumour, sell the news’ is a famous idiom for a reason. In most cases, markets start to fall on the risk of an economic recession, not when the recession is all but guaranteed. This year is no exception, H1’s performance was painful for investors because the market anticipated that strong rate hikes would slow the economy even if it was still growing. Once the economy started to show signs of slowing, markets started to predict monetary easing and rebounded in July. What does our core scenario, where recession is guaranteed, and the only remaining issue is its duration and intensity, mean for investors? It means that in all likelihood, the time for very defensive positioning is gone. The recession is priced in, so going to cash or Min Volatility would have been a good idea months ago. it may be too early for cyclical, aggressive play. Markets have not yet priced in a deep or long recession. A strong, established rebound could still be months away. This leaves investors with defensively-minded, all-weather options. Equity Investment can protect the portfolio if the market starts to expect a deeper recession or participate in the upside if it anticipates a more technical recession. Figure 2 compares the performance of the different equity factors during periods of equity drawdowns. We also include in the analysis a strategy (WisdomTree Quality) combining Quality and High Dividend (focusing on Dividend growing, high-quality companies). Without surprise, the most defensive factor is Min Volatility which reduced the drawdown in all eight periods. Just behind, Quality, WisdomTree Quality and High Dividend would have helped protect the portfolio in 7 out of 8 of the periods. The rest are more cyclical and would have, in most cases, underperformed the market and delivered deeper losses. Returning to defensively-minded, all-weather options, Figure 3 focuses on the most defensive factors but then looks at the capacity of those strategies to capture positive moves. The upside capture ratio is the percentage of market gain captured by a strategy when markets go up. If the upside capture ratio of a strategy is 60%, then when the market goes up by 10%, that strategy would only go up by 6%. Clearly, Min Volatility suffers from a very low upside capture ratio. On the contrary, while being defensive (see Figure 2), Quality and High Dividend exhibit a large propensity to capture the market up moves. WisdomTree Quality is the strategy that exhibited the highest upside capture ratio. In the second half of 2022, awash with uncertainty, a balanced approach between high-quality and dividend-paying stocks could prove very useful in navigating the different ups and downs that could materialise. Definitions the Tech Bubble (4 September 2000 to 12 March 2003) the Financial Crisis (16 July 2007 to 9 March 2009) the Euro Crisis I (15 April 2010 to 5 July 2010) the Euro Crisis II (2 May 2011 to 4 October 2011) the China Crisis (15 April 2015 to 11 February 2016) Q4 2018 (21 September 2018 to 27 December 2018) Covid-19 (12 February 2020 to 23 March 2020) H1 2022 (4 January 2022 to 17 June 2022) Global equities are proxied by the MSCI World net TR Index. Min Volatility is proxied by MSCI World Min Volatility net total return index. Quality is proxied by MSCI World Quality Sector Neutral net total return index. High Dividend is proxied by MSCI World High Dividend net total return index. Value is proxied by MSCI World Enhanced Value net total return index. Momentum is proxied by the MSCI World Momentum net total return index. Size is proxied by the MSCI World Small Cap net total return index. Growth is proxied by the MSCI World Growth net total return index. WisdomTree Quality is proxied by the WisdomTree Global Quality Dividend Growth net total return index. Sources 1 German Federal Waterways and Shipping Administration This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
FRED:USALOLITONOSTSAM
by aneekaguptaWTE
2
INFLATION HAS TOPPED OUT!Good day We have all heard the news regarding the FED increasing interest rates in order to solve the inflation "crisis" we are currently enduring. Some say this is great, some say this is horrible, however, overall this move was inevitable as markets such as this are cyclical and manipulatable by those who control monetary policy. For those who are in the market for a quick buck that follows the advice of so-called pro traders, this may not be the greatest time for you. On the other hand those with diamond hands, the smart money understand the benefits of this very rare occurrence in time. Not only will you be handed a highly decreased asset to invest in, in the next few days/weeks but, your spending power will increase due to the FED's attempt to bring inflation to 2% on top of a substantial increase in wealth once we are out of the thick of it. (2024) It is not possible to know when inflation will reach 2%, only those who control the market fluctuation know these dates but for now, we need to understand that we are going to be in a recession most likely for the better part of 2 years, which coincidentally will line up with the cyclical bull market structure of BTC. Could this be a coincidence or are we heading for a bull market never seen before? it could be argued that the crypto space specifically has been held back in the recent bull market and like a spring will eventually jump to levels only one could dream of. This statement will be strengthened dramatically as the world moves into a space where digital currency becomes the framework of the exchange of value internationally and in all aspects of the current macroeconomic structure. This narrative will only be pushed on an institutional level once the ever-desired and increasing space achieves regulatory clearance of some sort in order to enable governments to sustain some sort of market dominance. This idea is widely unexcepted by the retail investor as most feel governments must be done away with in order to open up for a fully decentralized network to govern our financial sector globally... as great as this sounds it just sounds more and more like a pipe dream. We as people need to have some sort of governance and a system that regulates our decision-making on a financial level or else chaos will break out leading to potentially societal collapse. But on the bright side, the crypto space will eventually allow for a stable deflationary environment where our wealth will have a safe haven to grow. All we need to do is sacrifice complete decentralization in order to achieve a potential innovation of the financial system that will revolutionize finance forever... In this case, we all win... @TradingView
ECONOMICS:USIRYY
by Crisp_Flow
2
Unemployment is inevitable according to market history.Graph of the inflation rate with unemployment rate laid over top. EVERY TIME that inflation has peaked and rolled over, unemployment has spiked shortly after. If you wonder why Powell says things like "The labor market is unsustainable." it's because he and every central banker in the world (more or less) are trying to kill inflation. Inflation dies, it takes out employment. So the next time someone points to labor statistics as a sign of economic health, you can tell them that employment is transitory.
ECONOMICS:USIRYY
by stockpreacherman
1
Deep Qualitative Fundamental Analysis of US EconomyWe are going to look the US Economical situation in order to understand what moves the markets. There are few factors, that should be observed and based on historical behaviour a long or short bias can be made. Most important factor for the economy is how GPD behaves, that is why a deep analysis of GDP is required. Technical Recession is defined when Real GDP has 2 negative consecutive quarters. ISM PMI, NMI Basics: The historical correlation between Real GDP Growth and ISM PMI/NMI is 85%. PMI/NMI are leading indicators and they are going to predict how GDP will move. It is short to long term prediction (within 12 Months) If PMI/NMI is above 50 means that overall economy is growing and if it is below 50 – economy is slowing. ----- Current: PMI 52.8, but slowing; NMI 56.7, but slowing Score: 2 – Inflation Prediction: slowing GDP From chart a correlation between ISM PMI, NMI and GDP can be seen, and how GDP follow PMI and NMI. Consumer Sentiment Index Basics: The level of confidence that consumers have about the stability and future prospects can be used to understand the overall trend of the economy. If the Sentiment is low this will cause the economy to shrink, if it is high – expand. ---- Current: 51,5 Score: 10 – high Inflation Prediction: very low GDP <-3% Building Permits Whether or not developers are bullish/ bearish on the prospects of the future home sales. More applications mean an expectation of future sales. This will increase the supply of loans. Building permits gives an insight into liquidity and health of US and banking sector. ---- Current: 1674(very high), but slowing. It seems that Permits already peaked. Score: 9 – high Inflation Prediction: lower GDP Money Supply M2 Basics: The supply of money coming from central authorities being injected or withdrawn. More money causes more inflation. M2 is most important measure of money supply and is used as injection and withdraw to control inflation, growth and value of the currency. We can analyse the data by looking at the long term growth rate of M2, analyse the trends and when the trend is broken ---- Average rate of change – 6,71 M2 peaked at 2020 with, since 2022 growth rate is 1,71 Score: -4 – started to deflate Prediction: lower GDP <-3% In 2020 money supply growth peaked and since 2022 has started to slow down. It means that at the moment the monetary policy is tightening. Interest rates Basics: The Fed decreases liquidity by selling Government bonds (withdraw). This rises the Fed Funds Rates, because banks have less liquidity to trade with other banks. The Fed increases liquidity by buying Government bonds (injection). This lowers the Fed Funds Rates, because banks have more liquidity to trade with other banks. In low Interest rates environment, money is cheaper and currency will lose value and vice versa. When GDP is very high, the FED must decrease the Rates in order to slow GDP. When GDP growth is contracting, FED must increase Interest Rates to bring it to the normal. When inflation is above long term average trend the FED begin to increase the rates, usually at a slow pace then at faster pace if inflation is too high. Long decreases in rates are associated with falls in GDP ---- Current: 2.33% (before - long time 0%) Score: 9 – high Inflation Prediction: increase Rates GDP already have started to fall below 0%, this will make the FED to increase the rates until GDP is back to normal (average trend). Since 02.2022 Interest rates are growing, but GDP is still falling, it means that the FED will continue to increase the rates next months even more aggressively, because of the magnitude of the GDP fall. CPI / Core CPi Basics: It is normal to have average inflation between 0,5% and 1%. Increasing GDP growth and Inflation go hand in hand, because nominal growth causes prices to rise. Inflation must be kept under the target rates in order to obtain GDP growth. This year the FED target was 2% , currently is 8,5% (last month 9%). The current inflation is much higher than the FED wanted. Interest rates were a bit increased last few months and this measure slowed down the inflation from 9% to 8,5%, but it is still to high. If GDP falls a lot this will cause deflation. In this case very high Interest rates will be seen. Negatives are very rear and the FED will not allowed this to happen at any cost. ---- Current: 8,5% Score: 10 – high Inflation Prediction: increase Rates PPI / Core PPi Basics: Business inflation is normal. The Business react strongly to Oil and Food prices. That’s why deflationary months are also normal. GDP growth correlate with PPI. ---- Current: -0,5% Score: -4 Prediction: increase Rates NFP Basics: NFP can affect Consumer Sentiment. Unemployment rates rises but there are no extremes. So, the numbers will not affect the economic so far. NFP is interesting only if there is extremes in % change. Lower GDP levels can cause stronger unemployment rates. Debt to GDP Ratio Basics: If the Government spend more than it is receiving in Tax Revenues this will continually add more debt. As the debt to GDP ratio increases, Economic growth becomes more depend on public spending. The public spending needs to be cut in order to reduce the debt. Higher debt to GDP ratio means more pressure to inflate. The only choices are to deflate, default on debt or inflate further. If Levels are above 100%, Government have very little choices - to inflate further. Central bank must keep the interest rates low and/or increase the money supply in order to print higher levels or GDP. ---- Current: 122% Score: 10 – high Inflation Prediction: The debt was above 100% in past few years, that is why the FED kept low rates and printed a lot money. This brought the enormous inflation. Surplus/Deficit Basics: If debt rise, deficit will rise too. The Government must continue to inflate or risk deflation or/and default. ---- Current: -12% Score: 10 – high Inflation Prediction: Interest bill Basics: If there is no debt there will be no interest bill. The bills are always deflationary, important is how much. If the interest rates rise, the bills will rise too – this will be very deflationary for the country. ---- Current: 1,53% Score: -6 Prediction: increase of the bills, because of the Interest rates. This will be causing deflation in 6-12 months. Liquidity Cover Basics: Liquidity cover is the Government’s ability to pay the interest bills. It calculates how many Taxes Revenues will cover the interest bills. Higher level means that the Government can pay the interest bill and continue current levels of public spending. The low Interest rates helps Government to stay liquid, means to service the debt and maintain public level of public spending – to inflate more ---- Current: 11,5% Score: 2 Prediction: increase of the bills, because of the Interest rates. This will be causing deflation in 6-12 months. Balance sheet Basics: When officials want to stimulate the economy, they buy more assets and expand their asset portfolio. When they want to restrict growth, they let assets roll off and shrink their balance sheet. If Interest rates goes higher, the balance sheet goes lower. The FED sells government assets (Bons). During economic crises, the Fed can expand its balance sheet by buying more assets under LSAPs, a policy also known as quantitative easing (QE). ---- Current: Score: 9 Prediction: Increasing the Interest rates, will shrink more the Balance Sheet. 10 years Yields Basics: If Yields goes lower this creates lower interest bill on outstanding debt and this is inflationary, because it allows more room for spending (injections). Low levels of Yields increases the ability of the Government to create more inflation. ---- Current: around 6% Score: 0 Prediction: goes higher Summery: Because of the high levels of debt ( over 100% ), the FED had no choice, but inflate further. That’s why they kept extremely low the interest rates in order to expand the Real GDP Growth, Balance Sheet and printed big amount of money. These actions brought the enormous inflation over 8% (target 2%). Because of high GDP levels and high inflation, the FED must increase the Interest rates. They already began few months ago with small pace, but this is only the beginning. The leading economic indicators are showing that GDP will continue to fall and this will cause hiking the rates more aggressively. The FED already have announced on Jackson Hall meeting, that they will fight with the inflation with more aggressive moves. High increasing the FED Fund Rates, cause the Treasury Yields go rise, that’s why every investor will invest in US Securities and not in other currency. The higher interest rates also will make the economy to deflate. There is a high risk of Recession. High Scale 160 Low Scale -150 Full Scale 310 SCORE 57 Bias: Long against the other currencies, commodities, metals at least to the end of 2023, then further analysis will be required. The future deflation/recession probably change the bias to Short.
M
by SerpentForexClub