Jeroen Blokland

These days, it is almost impossible not to talk about gold or bitcoin - for me, these two assets are close in what they offer investors. So I do just that. What strikes me most is the extreme divergence that has emerged in a traditionally very strong relationship.

Skyrocketing mortgage rates and astronomical house prices make it almost impossible for the average American to buy a house. So activity declines. The result is a drag on growth.

The US 30-year mortgage rate, while falling slightly, is still close to its highest level in more than 23 years. Nevertheless, house prices have risen to record highs after a brief dip. This is only nice if you own a house, because otherwise it is an unfavourable combination economically.

Let me begin by stating my agreement that the Federal Reserve is unlikely to raise interest rates imminently. However, basing this expectation solely on the latest inflation figures seems overly optimistic. The recent data, after all, were not exceptionally positive.

If you’re a regular on platforms like X or LinkedIn, you’ve likely encountered those attention-grabbing posts proclaiming, “If you’re not using AI, you’re left behind” or “My boss thinks I’m an AI genius, but it’s because of this…” followed by a link to some Substack or website. Such posts, often cheap advertising, may overstate the productivity boost from Artificial Intelligence (AI).

China faces a complex challenge as it aims to further stimulate its economy amidst a relentless property crisis while avoiding the repercussions of a devalued currency. It’s a delicate tightrope walk that could see the nation persistently offloading US bonds and equities.

The Chinese government is poised to inject an additional one trillion yuan into its faltering economy. The persistent property sector woes show no signs of abating and are now seeping into banking, construction, and retail.

Interest rates are shooting up and in some cases have reached the highest levels in decades. The share prices of US regional banks are collapsing again. And yet reports of new collapsing banks remain absent. Why?

Deposits!

The chart below provides the answer to that question. Despite continued competition with money market funds, deposits of smaller US banks are steadily increasing. Compared to a year ago, there has been a modest growth of 2 per cent.

As Italy’s 10-year interest rate hovers around 5 percent, flashbacks to late 2012 become inescapable. A time not far off when Italy’s place in the Eurozone was in question. Could we be on the brink of another debt crisis?

Many in the investment world have a myopic view, focusing intently on ‘the spread’, especially with nations deep in debt. As per the International Monetary Fund (IMF), Italy currently boasts a rather ‘admirable’ debt-to-GDP ratio of 144 percent - and this pertains only to public debt.

The chart making waves on social media isn’t getting attention without reason. It suggests that the real turmoil in the US labour market kicks in only after the yield curve has been inverted for over a year. Investors might be celebrating a soft landing prematurely.

Thursday’s ADP employment growth figure modestly stood out with a meagre addition of 89,000, but the real stunner last week was the ISM Manufacturing Prices Paid Index. Contrary to expectations and amidst surging energy prices, it plummeted last month to a level of 43.8, nearly five points lower than the previous month.

A recent chart from UBS has caught my attention. It indicates a surprising reluctance among Americans to spend during the upcoming holiday season, especially when compared to their willingness in July.