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Chart of the Week and Weekly Report Highlights
This week: big themes for the year ahead, bond yields, gold positioning, EMFX and EM bonds, growth outlook, inflation, and key risks to global equities...
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Chart of the Week - Global Policy Pivot
Monetary Policy from Tailwind to Headwind: Last year I counted 123 rate hikes across 41 central banks… meanwhile already so far this year I’ve counted 67 interest rate hikes across 45 central banks, with the majority of central banks globally now well into rate hike mode.
EDIT (5-May): the YTD count is now ~100 hikes, and over 50 central banks hiking rates.
The latest big new arrival to the rate-hike club was of course the Fed, and most expect a fairly aggressive hiking cycle; potentially with QT starting soon. Incrementally this will all present increasing headwinds to global growth and risk assets.
EDIT (5-May): the Fed has announced QT (starting 1 June).
Indeed, the chart below tracks the net-number of central banks in rate cutting vs rate hiking mode. It maps out the clear policy pivot that occurred last year, and which accelerated this year: towards interest rate hikes and stimulus removal.
If we take this chart literally, the global manufacturing PMI looks set to drop below 50 by the end of the year. Not sure how many 2022 outlook pieces had that on their list!
Key point: The global monetary policy pivot presents clear headwinds to growth.
— UPDATE — 14 Sep 2022
As of the latest data, I now count over 230 rate hikes across 80 central banks.
And since I just pointed to this charticle from another post, here is that chart above updated to the latest and not so greatest data:
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Topics covered in the latest Weekly Insights Report:
Global Growth Outlook: shifting sands: upside, downside, risks.
US 10yr Bond Yield: another break higher after a brief consolidation.
Commodity Currencies: going from strength to strength, esp. EMFX.
Gold Sentiment: clear upshift in flows and positioning, the chase is on.
EM Bonds: an overlooked, unique, and interesting corner of the markets.
Prices & Policy: surging inflation threatens to derail the fragile global recovery.
Global Equities: risk signals and valuation metrics to keep an eye on…
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