Daily update
Daily update
- In the last few days, we have seen bonds sell off, then rally, and the oil price has suddenly plunged USD 5 per barrel. Equities have swung back and forth. What is going on? This, in short, is what happens when economists are not in charge.
- Neither the Federal Reserve nor the European Central Bank has leaders who have set out a vision for policy. There is no sense of a long-term framework like Volcker’s monetarism, Yellen’s labor market focus, or Draghi’s “whatever it takes.” Today’s central bank leaders just react to the latest data point. Thus, rogue numbers can and do push expectations of policy back and forth—because investors fear weak leadership in central banks will respond to the latest shiny new number placed before them.
- Today’s shiny new data includes industrial production figures from France and Spain—remember that business sentiment has become increasingly divorced from reality of late, and these numbers represent the real world. US initial jobless claims are also due.
- Belgian security forces have reportedly been monitoring the activities of China’s Alibaba. This follows from the ongoing Canada-India tensions. Economic nationalism is manifesting in a rather Cold War sort of way (diplomatic expulsions, accusations of espionage). Investors need to recognize this.
