Jeroen Blokland

I am intrigued and—admittedly—surprised by the robustness of American consumer spending. I understand that wage growth has been substantial, but inflation has risen even more. While nearly everyone in the U.S. has a job (or two or three), it hardly offsets the increased financial burdens.

Long-term inflation expectations have risen this year.

At the time of writing, markets are still pricing in just under a 60 per cent chance that the ECB will raise interest rates one more time sometime in the coming months. And although Lagarde has only recently turned to wage growth as an argument for further tightening, there are plenty of reasons to at least pause.

The ‘intra-day’ turn of the S&P 500 Index following the release of US inflation data is the first evidence that Powell has deprived markets of ‘Fed hopium’.

US headline inflation rose to 3.2 per cent in July from 3.0 per cent. While that was lower than expected, it was nevertheless the first increase in the inflation level since June 2022, which (social) media used to fill headlines. 

I had to double-check my Bloomberg screen. But it was there indeed, Dutch central bank chief Knot indicated in a recent Bloomberg interview that further monetary tightening after the ECB meeting in July is anything but guaranteed. And that, coming from the most hawkish member of the ECB’s Governing Council.

I’m a big fan of the Bank of America Global Fund Manager Survey. Firstly, because it pertains to the positioning and perspectives of real investors managing significant amounts of money. And secondly, because Bank of America tries to translate the responses given in the survey into signals and even investment decisions—something often overlooked by many “storytellers.”

Markets globally expect earnings to rise over the next 12 months. Whether in the US or emerging markets, everywhere the expected earnings-per-share are above the current ones. Whether this will happen is doubtful.

The money supply is rapidly shrinking, something that rarely, if ever, happens. In the United States, the money supply is shrinking by more than 4 per cent on an annual basis. And while there is an endless debate whether you should look mainly at the money supply or the money supply, as far as I am concerned, the latter is the most important.

A recession is what usually concerns many investors, and economists. But exactly how they estimate the probability of a recession is often unclear to me. And sometimes not much of the “approach” is correct either. Given the significant potential impact on different asset classes, it makes sense to attempt to get a grip on it myself.

The workings of financial markets never cease to amaze from time to time. Especially when they decide to systematically deny the elephant in the room. Equity investors are often blamed for this behaviour, but high-yield investors can also have some of it at the moment. 

If there is anything consensus after the demise of Silicon Valley Bank, it is surely that the outflow of bank deposits is leading to tighter lending requirements. Not least because loan-to-deposit ratios have increased.