Our Views

2019 in focus

April 4 – 2019

Dysfunctional long-term rate markets: next stop for 10-yr US is 1.25%, not 3.75%.

In global risk-on markets, many participants now regard the jitters of late last year, as a bad dream, which did not reflect actual or future reality.

The optimists now point to the looming US-China deal, Fed “easing”, and perhaps an “orderly” Brexit. Furthermore, data points this week in China and Europe have been “supportive” of the “green shoots” view.

All of this is unconvincing. A China-US deal is not the magic wand to restoring Chinese and European growth. There have been winners as well as losers, from tariffs.

We just do not know, whether the pause in rate rises by the Fed amounts to monetary easing. The stance of policy should not be measured by rate moves. It is premature to cheer any Brexit deal.

March 5 – 2019

“If President Trump were seriously intent on tackling the currency manipulators in Tokyo, Berlin/Frankfurt, and yes, Beijing, his Administration would be arguing for a shift of monetary policies in those capitals. Radical monetary ease, including negative rates, is the core thrust of currency manipulation – responsible for the cheap euro, yen and yuan. There is absolutely no indication that Trump Administration officials are thinking in this way. Even if they were, the concern might be uppermost that asking Europe or Japan to tighten monetary policies could set off a global stock market crash, the opposite of what the Top Command wants.

“Meanwhile President Trump has been filling all the empty chairs on the Fed with neo-Keynesian economists or private equity barons – all of whom fully approve of the monetary policies, as now consensus in the global central bankers’ club. How can the US attack Europe and Japan for following versions of a monetary philosophy which it practices itself?”

February​ 28 – 2019

“Markets are celebrating the apparent postponement of economic and political danger in three areas. First, the dominant view in the market-place appears to be that Fed Chief Powell has successfully postponed the transition of asset inflation into its dangerous end-phase of asset deflation and recession. Second, there is strong expectation that the immediate postponement of US- China tariff war will lead on to indefinite postponement. Third, the capitulation of the May government to the EU withdrawal terms and effective ruling out of a no-deal Brexit is being celebrated in the markets as meaning that no deal is now permanently off the table. All these hopes of indefinite postponement are likely to be dashed.”