5 Things We Watch: Macro Regime, Riyadh Accord, Sloos, Ukraine, USD
This week we would like to draw your attention to our monthly macro regime indicator which has been updated. Then we’ll argue for a Riyadh Accord, and after that look at this week’s SLOOS release. Then it is time to talk geopolitics and Ukraine. Finally, we’ll take the temperature on the US Dollar
This week we are watching out for the following 5 topics within global macro:
1) MACRO REGIME INDICATOR: HEAVY LONG IN CYCLICAL FX
Our allocation model suggested longs in Silver, Gold, USDJPY and USDMXN among other things through October, which yielded strong results.
For November, we expect improvement in the US manufacturing cycle. Despite the latest ISM PMI of 46.7 vs. est. 49, our models still suggest PMI’s above consensus, and if the latest Chinese stimulus works as intended, it will only boost global activity further very short-term. With regards to inflation, the Euro area is firmly approaching 2%, and judging by PPIs, ISM prices paid, and wage growth, so is US inflation – albeit with a much more cumbersome trajectory with room for upside surprises. The quarterly refunding report from the US Treasury was far from the issuance-bazooka that some had expected, but paired with QT and tight credit availability, liquidity ought to dwindle further.
In conclusion, we expect modest momentum in growth, inflation slightly down, and still receding liquidity; A regime we’ve labeled ‘Goldilocks without QE’.
Chart 1: This month’s Steno Research Macro Regime: Goldilocks without QE