A wide ranging and therefore good report from WF today from their weekly international economic commentary. I therefore post it up for weekend reading.
The quick summary, the data appears to be softening from Bejing to New York to London. I’m starting to get that all too familiar feeling of “deja vu” here and now. 2010 and 2011 were both sell in may and come back in sept years. 2012 is starting to feel very much the same way as we stand here today.
The summer months are often the time to rest up and reduce the number of trades. Only high momentum (monetary stimulated) markets (as in 2009) are really worth actively trading. We are still in the pre election window in US whereby the Fed could act. The monetary run way is fast diminishing however and the ‘self sustaining’ evidence is starting to look a bit thread bear once again.
Here the WF weekly economic commentary.
WF-Weekly-Economic-Comments04132012
And once again, re the specifics of inflation, the UK and US central banks are on the wrong side of the cpi forecast.. ie inflation is higher than they forecast (as it consistently always is). Inflation almost never surprises central banks to the downside it seems. To ignore this piece of evidence is to ignore one of the key indicators in the market. I’m not sure this makes QE3 less likely. I suspect Ben secretly strongly desires some positive inflation higher than it is as he well knows it will erode the US’s debts.
Higher than forecast cpi nos (even with the magical seasonal adjustments as well as subsitution and hedonically adjusted magic dust) are what the dc ordered. A very neo Keynsian doctor that is.
All the best and have a great weekend guys
Rich
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