Business Cycles
US corporate bonds performed well last year with both investment grade and high-yield spreads narrowing in 2023. Indeed, the 12-month breakeven spreads are relatively low – especially in the case of investment grade. This means that corporates have a…
The best leading indicator for post-pandemic US wage inflation is the ratio of job vacancies to ‘bad’ unemployment (V/U), where bad unemployment refers to ‘job losers not on temporary layoff’. This ratio has already declined from 6.4 to 4.1 and wage…
The combined US credit impulse and fiscal thrust indicator will likely relapse in 2024, heralding growth weakness. Stalling US sales volume and falling inflation, combined with sticky labor costs, will herald a non-trivial profit margin compression. The recent increase in Asian exports will likely prove to be a mid-cycle improvement rather than a cyclical recovery.
The Atlanta Fed’s US Wage Growth Tracker stalled at 5.2% in December, unchanged from November. Notably, after falling from a peak of 7.1% in June 2022, this indicator has stabilized at still-elevated levels in recent months. This dynamic raises the question…
Taiwan’s December trade data corroborates the signal from other Asian exporters (such as South Korea) that global manufacturing activity is experiencing a mini revival. Taiwanese exports surged by 11.8% y/y last month, surprising expectations of a much tamer…
Australian CPI inflation fell from 4.9% y/y to a 22-month low of 4.3% y/y in November – slightly below expectations of 4.4%. Underlying measures of core inflation also indicate that price pressures eased in November. The rate of growth in CPI excluding…
The Santa Claus rally started in late October lifting the S&P 500 by 15.8%. However, there are signs that the rally is getting tired. Consider the following: The S&P 500 has been trading at around 4,750 since the middle of December. …
BCA Research’s US Bond Strategy service recommends investors keep portfolio duration close to benchmark for now. They will increase rate exposure as the labor market downturn worsens. Treasury yields are up slightly to start the year, but last Friday’s…
The NFIB Small Business Optimism Index delivered a slight positive surprise on Tuesday. The index rose 1.3 points to a five-month high of 91.9 in December and beat consensus expectations of 91.0. However, the contents of the report were more mixed. On the…
The market’s pricing of a soft landing means that geopolitical risks are becoming more, not less, relevant in 2024. US domestic divisions will invite challenges as foreign powers rightly fear that US policy will turn more hawkish after the election.