Sentiment 10/2017
Recent central bank meetings have not given news about the monetary policy they will pursue in the future.
In several posts we expressed concern about the effectiveness of monetary stimulus both in terms of economic and inflation growth.
Liquidity poured into the market determined only the growth of financial assets and we now know that the ECB will gradually absorb liquidity while the Fed will raise interest rates already as of December.
Therefore from central banks seem to have positive signals on economic growth, but signals from the bond market analysis are far from encouraging.
Curve yields, as shown in the chart attachment, however give us another vision. The curve, measured as a differential between rates over different maturities, graphically reflects expectations on the future of economies.
If the economy is expanding, the curve has a positive slope to go negative when the expectations are for a slowdown in the economy to the recession.
The turning point is 1; whenever the differential has cut down on this value, the US economy, after a few months, has come into recession. Today, the value is close to 1.
This leads us to think that if the announced rise in US rates is going to be late and will hit a troubled economy.
To close please re-update our macro indicator. Something is changing in the market. Nothing relevant but the first warning signs are highlighted that should not be underestimated.
Giorgio Giovannoni
11/12/2017
 Indicatore macro USA.pdf | [ ] | 118 kB |
| Yield Curve.pdf | [ ] | 87 kB |
