And now for the next phase of mispricing
- Finally the Fed raised rates, with some cheerleading for the US economy alongside. Domestic inflation pressures seemed to be unusually prominent in the analysis. If only there was a book on The Truth About Inflation to assist with understanding the issues.
- There is still plenty of opportunity for markets to misprice the Fed tightening cycle. With data revisions more frequent and tending to be biased to the upside, the market tendency to focus on initial rather than revised data may lead to underestimation of the Fed.
- Europe is offering the ifo business confidence survey from Germany. Investors do seem to still view the Euro with Germany as a proxy – this is not appropriate but may give a positive bias to perceptions.
- The UK is offering retail sales data. The US is giving us the Philly Fed business sentiment survey. One problem with the moves in the dollar is that this distorts the real versus nominal distinction in data, and the Philly Fed may not show what it is supposed to show.