Negative US growth, two constitutional crises and pegs on the line.
Global financial conditions have tightened again; Macro Thoughts has considered the implications for US growth, which could be negative in Q1 (highlighted in Macro Thoughts November 15, 2016) and for Europe, where two constitutional crises need to be avoided over the next few weeks. Yet there may be an even greater macroeconomic shock to come, as the strength of the USD and higher US interest rates could force countries aligned to the US Dollar to abandon their currency pegs.
But it is not possible for US 10 year yields to rally 50bp in two weeks and not have an impact.
The US Dollar index is at its highest since 2003 and Treasuries have sold the most in a two week period for 25 years and this will have an impact on US growth, which could potentially push Emerging Markets into a crisis.
Just as the second political shock wave dies down, the eruption of constitutional crises in Europe could generate the full volcanic explosion on December 4 and 5, as both Italy and the UK will be bracing for the results of critical political decisions.
At the end of May, Macro Thoughts considered that Italian yields could start to underperform Spanish bonds after the June 26 Spanish election, as even if the result was the same as January’s, political bargaining and Spanish law meant Italian issues would come into focus while Rajoy and opposition parties negotiated.
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Macro Thoughts is independently researched and draws on extensive macroeconomic and market experience gained in Fixed Income, Futures, Derivatives, Bond, Forex, Commodity and Equity Index markets and from strong Global Macro investment, risk taking and strategy backgrounds. Far-reaching product knowledge across asset classes enables us to consider hedging and investment strategies that reflect our expected market trends. Macro Thoughts is directed by Keith Grindlay, whose experience spans, somewhat uniquely, both the buy and sell side, having managed trading and investment desks at top tier institutions, ensuring all strategies are evaluated for risk/reward and the optimal instrument(s) for best leveraging the strategy suggested are employed.
Globally recognised for strong analytical skills, aligned with a particular aptitude for anticipating global economic events ahead of the majority of commentators, Macro Thoughts’ independent fundamental economic research and analysis and resultant strategies have a track record that assures exceptional results, with a service that surpasses the model of bank-supplied, partisan research and stands out from the general contributions on platforms that your clients and peers already have access to. The support and value offered by Macro Thoughts, delivering written research and analysis, presentations and consulting services, is backed by decades of macroeconomic and market experience and can be tailored to your specific requirements.
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