Источник
Insights and Analysis
Выбор редакции
07 сентября, 17:47

Gold: Risk from Diminished Rate Expectations

  • 0

Gold, silver and platinum prices have been rebounding over the past six months for what appears to be one major reason: investors losing faith in the Federal Reserve (Fed) to continue raising interest rates in the current tightening cycle, as reflected in Fed Funds Futures.  For example, in mid-March, Fed Funds Futures priced the Fed’s target rate to be most likely in the 1.75% – 2.00% range in two years.  But by the end of August, those expectations had cratered, and the market now anticipates the Fed target rate to be most likely below 1.5% in two years (Figure 1).

Выбор редакции
05 сентября, 14:00

Impact of Low Inflation Expectations on Wages

  • 0

Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.

Выбор редакции
30 августа, 16:30

Why is Wage and Productivity Growth Sluggish?

  • 0

Despite a tight labor market, wage and productivity growth remain low in the U.S.   Wage growth stood at just 2.5% in July 2017, on par with post-Recession performance.  Labor productivity growth averaged only 1.1% between 2007 and 2016.  Between 1995 and 2007, by contrast, the average growth rate was 2.5%.  Although cyclical factors may be partially to blame, there are several key structural features of the U.S. economy contributing to diminished growth.  Wage and productivity growth are being held back by persistently low inflation expectations, workforce demographics, and the shift in the payrolls distribution in the economy in favor of lower-wage sectors. The Federal Open Markets Committee’s (FOMC) minutes of the July 25-26 meeting underscored its concern with wage and productivity data.  The committee noted there was “tightness in the labor market, but. . . little evidence of wage pressures.”  Some FOMC participants speculated if the “hiring of less experienced workers at lower wages” was a contributing factor.  Others pointed out that low wage growth is in line with what productivity growth and the inflation rate (both sluggish, of late) would suggest.  Indeed, the Federal Reserve’s concern about wage and productivity growth is likely to be a major factor in the debate over the timing and termination point of future rate rises – arguing for fewer and further apart hikes, and perhaps a termination point around the range of 1.50% to 1.75% for federal funds. The FOMC’s unease with wage and productivity growth is hardly unique.  Analysts and academics alike have advanced a spate of theories to explain the low numbers.  Favorite suspects include lingering weakness in the labor market not captured in the headline unemployment number; downward nominal wage rigidity; output mismeasurement, particularly in services and tech-related sectors; a drought of productivity-boosting, technological advancements; a slowdown in capital growth; and the deteriorating quality of public education. Although many of these factors may play a role in limiting wage and productivity growth, the U.S. economy has also undergone several structural changes:  1) persistently low inflation expectations, 2) shifts in workforce demographics, as Baby Boomers exit and Millennials enter the workforce, and 3) the changing distribution of payrolls by industry favoring lower-pay sectors.  Our view is that structural changes are largely responsible for the modest growth in wages and productivity in the economic expansion after the Great Recession of 2008-2009.  By implication, there is nothing the Federal Reserve can do with monetary policy to address structural changes related to demographics and shifts in the distribution of jobs among sectors.  

Выбор редакции
24 августа, 14:00

Oil: U.S. Output and OPEC Production Cuts

  • 0

Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.

Выбор редакции
23 августа, 14:00

Uneven Debt Levels Complicate Eurozone Monetary Policy

  • 0

Former British Prime Minister Winston Churchill once remarked that Americans could always be counted on to do the right thing after having tried everything else.  The same could be said of the European Central Bank (ECB) for what it did over the past decade in the aftermath of the financial crisis.  While the U.S. Federal Reserve (Fed) and the Bank of England (BOE) swiftly lowered interest rates to near zero in late 2008 as the crisis unfolded and initiated quantitative easing (QE) in early 2009, the ECB took a different approach.  It didn’t lower its refinancing rate all the way to zero in 2009, and was tightening monetary policy by 2011 (Figure 1).  The result was a disaster.  Yields on non-German debt soared (Figure 2), bringing Greece, Ireland, Italy, Portugal and Spain to the brink of financial collapse while the eurozone experienced a double-dip recession that the U.K. and U.S. avoided (Figure 3). After 2012, when ECB President Mario Draghi indicated that the ECB will backstop eurozone sovereign debt markets and began cutting rates in earnest, yield-spreads narrowed and the eurozone economy recovered (Figure 4).

Выбор редакции
21 августа, 17:51

Oil: Is Climbing U.S. Production About to Peak?

  • 0

Since October 2016, U.S. crude oil production has surged by over one million barrels per day, replacing more than two-thirds of what the Organization of Petroleum Exporting Countries (OPEC) was supposed to cut to shore up prices.  However, it looks like the growth in U.S. production is quickly running out of steam (Figure 1) and, all else being equal, this should be good news for OPEC and the price of oil.  Those hoping to see a continued rise in U.S. production should have two immediate concerns: The number of operating oil rigs has stopped growing (Figure 1) The marginal productivity of operating oil rigs is falling quickly (Figure 2)

Выбор редакции
10 августа, 22:45

China: Does Yield Curve Portend a Recession?

  • 0

Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.

Выбор редакции
08 августа, 22:00

Will China's Flat Yield Curve Flatten Commodities?

  • 0

In the United States, one factor appears to do a better job of forecasting economic downturns than any other: the shape of the yield curve.  Over the past 40 years, there have been five sustained yield-curve inversions – when long-term interest rates are lower than short-term rates -- and each one presaged a recession and a significant rise in unemployment (Figure 1).  The good news is that despite the Federal Reserve (Fed) raising interest rates four times since December 2015, the U.S. yield curve is nowhere near to signaling a recession.  Ten-year yields still exceed two-year yields by nearly 100 basis points (bps).  

Выбор редакции
03 августа, 14:00

The Differing Nature of Event Risk

  • 0

Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.

Выбор редакции
02 августа, 20:48

Hedging Portfolio with Commodity Currencies

  • 0

Investors who wish to gain exposure to commodities can do so directly through futures, options and other derivatives; or indirectly, and perhaps unintentionally, through the currencies of commodity exporting nations.  The Australian dollar (AUD), Canadian dollar (CAD), Brazilian real (BRL), Mexican peso (MXN), Russian ruble (RUB) and the South African rand (ZAR) demonstrate positive and, at times, reasonably strong correlations to a large basket of commodities. (Figure 1). 

Выбор редакции
29 июня, 18:09

The Conundrum of Slow Growth & Tight Labor Market

  • 0

Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.

Выбор редакции
27 июня, 19:11

E-mini Russell 2000 Webinar for Active Traders

  • 0

For active traders, the return of E-mini Russell 2000® Index futures and options expands an already broad suite of benchmark U.S. equity index products you can trade at CME Group. That gives you even more ways to tap into the liquidity of small-caps stocks. See how in this webinar.  The webinar will cover:  • Russell Index fundamentals, focusing on the small-cap Russell 2000 benchmark  • E-mini Russell 2000 contract highlights, plus margin offsets with CME  • Advantages of trading E-mini Russell 2000 futures in place of ETFs • How to use E-mini Russell 2000 to spread trade small-cap vs. large cap stocks  • Exploring E-mini Russell 2000 options volatility – rich or cheap?