The Weekly Hark - 13 Aug 2023
A messy, choppy and erratic summer week which had something for everyone...
A messy, choppy and erratic summer week which had something for everyone... bank downgrades but positive Alibaba earnings, disinflation trend continuing in the spot data but signals of re-acceleration also appearing, rates will remain higher for longer, but Fed members are comfortable discussing the prospect of 2024 cuts, RoW growth underperforms the US with China property fears rekindled as well as Biden limiting PE investment into China but the CRE Maturity Wall and multi decade high mortgage rates look to curb US economic data (with a laggggggg) as we head towards Q4 and the Fed finally arriving in restrictive territory. Very interesting to see the Fed's Williams and Harker endorse 2024 cuts ... not that it helped ease the risk aversion as the RoW struggles relative to the Q3 4% growth forecasts in US.
The key narratives that drove markets last week:
USofA: Is the Fed done?
Very little now priced into September, but concerns are growing that base effects, gas prices, labour hoarding, wage pressures, resilient economic data will keep rates elevated, and we're only at a localised low in inflation = Higher for longer.
ING argue there is "not enough yet for rates to fall"
Cubic Analytics: Disinflation is Sticky
BoB Elliott appears on The Irrelevant Investor podcast (hosted by Michael Batnick) to discuss CPI re-accelerations risks and much more.
Nordea Macro & Markets: Soft landing dreams
The NY Times: Heat, War and Trade Protections Raise Uncertainty for Food Prices
JPM Global FX: Deconstructing the FX landscape through a macro, systematic and derivatives lens
The Bondbeat: Weekly Observations
St Louis Fed Pres Harker, Speech: Worker Voices Show Us What the Data Do Not
Chinese Property and Growth Concerns
Adam Tooze: Chartbook: Whither China? Part I - Regime impasse?
South China Morning Post: China debt: these 3 regions have the most daunting debt piles. So what can be done about it?
FT: Korea battery materials maker onshores China supply chain to win US subsidies
FXpoetry by Andy Fately: Xi Jinping's Dreams
MacroHive: Commodities Weekly: Geopolitics Impact Brent as China Cuts Crude Imports
Morgan Stanley: The Impact of New Investment Limitations in China
AI bubble running into negative equity seasonals
There is no one left to buy overvalued tech in the short run... Brent Donnelly: Friday's Speedrun Aug 11
The MacroTourist: Shoot 'em in the back... going short FANG+ futures
Some reasons to stay positive... MarketGauge.com: Slowing Inflation, Market Consolidation
Some further reading and takeaways from Camp Kotok
Brent Donnelly: Wen Vigilantes
Inside Camp Kotok: David Kotok on "Disastrous and Debilitating" Effect of Debt Ceiling on Bond Markets
Jack Farley at Camp Kotok: Rumours of The Death of Chinese Economy's Have Been Greatly Exaggerated
Bloomberg Economics: China's Economic Woes Deepen with Housing Market Slump
Yardeni Research: The Economic Week Ahead: August 14-18
Marctomarket.com: Anniversary of the End of Bretton Woods Sees Resilient Dollar and Firmer US Rates: Can it Persist?
Newsquawk: Highlights include US retail sales, FOMC Minutes, RBA Minutes, UK Jobs and Inflation
Adam Mancini: Will the second half of August finally see SPX Trend?
‘Housing Market’ and ‘Commerical Real Estate (CRE)’
How will historic mortgage rates feed into H2 economic performance?
Mortgage applications will slow, weighing on US retail sales as purchases to kit out new homes by owners will be rare.
Many families will be land locked, stuck with low rates that were refi'd during the pandemic ... hard to leave a 30yr fixed sub 4% to buy a new home with a > 7% mortgage
Pensions funds will be happy ... every coupon paid by the US government will improve their income streams and rebalance their multi-year exposure
Builders, labour hoard or start to lay off? Higher rates will slow the pace of new construction but will the post covid fears of re-employing workers dissipate and raise UER?
A lack of housing supply, shrinking stock with owners landlocked may support house prices as well as keep rents supported as tenants who can't afford a 7% mortgage remain in the rental space.
CRE and the maturity wall....
As 30-year mortgage rates hit multi decade highs, stay abreast of the evolving Housing/Commerical Real Estate narrative in two easy-to-consume channels on Harkster.com that are categorized and filtered to capture the latest research bullets on the CRE maturity wall, record high mortgage rates, slowing MBA applications etc etc ... A sample of posts from both the ‘Housing Market’ and ‘Commerical Real Estate (CRE)’ channels below:
Mishtalk.com: Bond Market Carnage Sends Mortgage Rates Soaring towards 23-Year Highs
Fortune.com: This institutional homebuyer has completely stopped buying
Calculated Risk Newsletter: Part 1: Current State of the Housing Market; Overview for mid-August
The Bitcoin Layer: The Corporate, CRE, and AirBNB Debt Timebomb
MS Thoughts on the Market: Bifurcation in global Office Real Estate Market
ZeroHedge: Downtown San Fran Office Tower Sells At 66% Off As CRE Crisis Claims Another Victim
Chart of the Week: 30yr US Mortgage Rates at 23-Year Highs
Source: 30yr mortgage chart courtesy of Mortgage News Daily, annotations by MishTalk.com
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Great Summary......Perfect !!!!
Always a great synopsis of the current narrative issues. never miss TMH