Tag Archives: inflation - 16 posts found

Higher Inflation Expectations to Favour Equities over Bonds

(from our Tactical of November 8th 2016) Bond yields have been rising in most countries, and yield curves have steepened across the developed world.  As the top chart shows, the rise in nominal yields has come from a rise in…


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Euro to Remain Better Supported

(from our Tactical of 18th October 2016) One currency that may buck the trend and remain supported against the dollar is the euro.  Although tapering from the ECB does not look imminent, core inflation may start surprising to the upside…


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Real Yields Wildly Mispriced Given Stagflation Light

The US now has the worst combination of outcomes, poor growth and rising inflation.  Bond yields are now the most negative they have been in almost forty years.  Only in the 1970s during stagflationary episodes were real yields this negative.   …


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Bond Yields Diverge from Inflation

Bond yields are currently diverging in a very big way from economic fundamentals, and our valuation tools point to a rise in yields.  Normally, there is a very tight correlation between the change in the ISM prices paid survey and…


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Inflation Alive and Well in the US

We have focused on the theme of the misplaced fear of deflation at Variant Perception frequently over the past 18 months.  At several points, markets and commentators seem to have become preoccupied with a belief that growth-destroying deflation was imminent….


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ECB QE: Inflation to Start Surprising to the Upside

The sharp devaluation in the euro and the rapid acceleration in economic activity will mean short-term inflation dynamics in the eurozone will soon start surprising to the upside.  In this context it is important to remember that the only justification…


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US Inflation and Wages Continue to Turn Up

The key message from our leading indicators is that US inflation and wages continue to turn up. This was one of our core themes for 2014 we discussed in December last year and is bearing out. Core inflation and headline inflation are positive, while wages are turning up sharply. This has implications for profit margins. Wage increases inversely lead US corporate profits by two years. We have with very high likelihood seen the peak in profit margins, and we would expect them to fall.


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Deflation not a danger, modest inflation with wage growth ahead

While markets are fixated on the threat of deflation and “lowflation” (a dumb word if ever there was one), our leading indicators are pointing towards modest core inflation ahead. Furthermore, our leading headline inflation indicator is rising moderately as well. We don’t have hyperinflation,…


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UK inflation to start rising again: linkers to outperform

UK inflation last week came back to the BoE’s target for the first time since 2009.  This should most certainly be a boon for consumers whose average real incomes have been negative for several years.  However, our UK Future Inflation…


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Inflation to hold UK recovery back

There are some notable reasons for near-term reasons for optimism in the UK. The housing market seems to be picking up, industrial production growth is looking up together with PMI data and the equity market has done well. All these are real and significant signs of a better economy in the UK, but the structural challenges remain.


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