Ska centralbankerna klara en mjuklandning denna gång?
Mjuklandningar vanligare när de föregåtts av framtunga höjningscykler.
I en studie daterad till den 14 juli har BIS identifierat 29 av 70 åtstramningscykler i 25 länder sedan 1980, där centralbankerna sluppit välja och lyckats mjuklanda ekonomin.
De blytunga USA-ekonomerna Olivier Blanchard och Larry Summers argumenterar att det över huvud taget inte längre är möjligt att stoppa inflationsvågen utan en hårdlandning med betydande jobbkris.
Nils Åkesson DI 12 augusti 2022
https://www.di.se/analys/monsterhojda-rantor-da-okar-chansen-for-mjuklandning/
BIS Bulletin | No 59 | 14 July 2022
https://www.bis.org/publ/bisbull59.htm
The End of the Beginning
After German troops were defeated in a pivotal battle at El Alamein in 1942, he commented that it was “not the end, not even the beginning of the end but, possibly, the end of the beginning.”
The rally in stocks has now gone on for four consecutive weeks, and more than half of the fall in the S&P 500 has been retraced.
The extent of the rally looks overdone, because of the critical issue of how long it will take to bring inflation down.
It’s nice that the peak is (probably) in; but the Fed wants us to believe that it won’t desist from high interest rates until its target of 2% core inflation is in sight. That won’t be easy.
One dog that has not barked during the bear markets for stocks and bonds this year: the credit market. Investment-grade corporate debt has done nothing more than adjust to the higher yields on Treasuries — spreads are no wider than they were at the beginning of the year, and remain much lower than they were for most of the last decade
High-yield credit has also seen a rebound, after a nasty selloff. This is one asset class that might naturally be expected to suffer from a rise in rates, but it isn’t happening yet
John Authers Bloomberg 15 augusti 2022
Markets evidently think the Fed will stop hiking sooner rather than later.
They are literally not paying attention to what multiple Fed officials are saying in speeches all over the country.
We have a name for concurrent inflation and recession: stagflation.
I have written about yield curves extensively in this letter over the last 23 years. Yield curves as inverted as the current one have always predicted a future recession. Always.
One of the mysteries presently vexing us is why long-term yields haven’t risen more, given the very high inflation we are enduring.
Bond investors seem to have a great deal of faith that the Fed, or something, will make inflation recede sharply and soon.
The markets are discounting a very different scenario. They are discounting one sharp round of tightening—comprised of a rise in short-term interest rates to just above 3%, combined with more than $400 billion of contraction of the Fed’s balance sheet—and that this will be enough to bring inflation down to 2.5% with stable growth and no dent in earnings.
From there, markets are discounting that the achievement of these goals would allow a subsequent 1% drop in rates from their peak.
Will the FOMC say “mission accomplished” at 6.5% inflation? What happens if we get a recession in 2023 like the yield curve is predicting?
Do they lean into the recession or keep fighting inflation? Bob Prince thinks (like a lot of other smart people) the Fed will worry more about the recession and cut rates, letting inflation stay uncomfortably high but believing that an actual real recession will be enough to bring down inflation as demand will get crushed across the board by a recession.
I see high risk they will take some kind of “pause” in the rate hikes later this year. They’ll say they want to reevaluate data, blah, blah, blah.
John Mauldin August 12, 2022
https://www.mauldineconomics.com/frontlinethoughts/curving-toward-stagflation
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