Building Economic Momentum – Navigating The Widening Recovery April 12, 2021
Our outlook for the U.S. economy has improved. We now expect real GDP growth over the course of 2021 to be close to 7%, which would be the fastest annual growth rate since 1984.
Monetary conditions in the U.S. continue to look strong as do measures of fundamental economic health, such as purchasing manager indices (PMIs). The following graph shows the three-month moving average PMI minus the 12-month moving average PMI. When the 12-month is higher than the three-month, the pace of economic growth is expected to be slowing. Conversely, when the three-month is higher than the 12-month, as is the case today, we expect the pace of economic growth to be accelerating.
Still, as shown on the left, in black, inflation expectations as expressed by the US-10-year breakeven rate–the difference between 10-year Treasury Bond and Treasury Inflation-Protected Securities (TIPS)–reached the highest in March since 2012.
The Bloomberg clip below from March gives a taste of the recent consensus.
The debate over inflation is drawing new battle lines in Washington and on Wall Street. Some investors and economists think record-setting government spending will send prices rising too far, too fast, but history suggests otherwise. Here is a direct video link.
As shown below from Jesse Felder and explained in Macro, risks to the stock market are mounting; the rate of change over the past 12 months (red line below) in the US 10-year treasury yield (shown in blue) is already unprecedented. The seven much-lesser back-ups in yield since 1986 triggered episodes of instability in the financial system that prompted risk-aversion, and then more central bank
Apr 12 2021
A glance through the latest expert views and predictions about commodities: Nickel, Oil, Platinum, Silver, Iron Ore, Copper
-Iron ore has mark of the value trap
-Nickel to fall by up to 15%
-Increased availability put downward pressure on sliver
-Brent oil to break US$75 in Q3
By Mark Story
Nickel
With Tsingshan’s move into ‘class 2’ conversion significantly undermining the medium-term bull thematic, Citi has trimmed nickel prices between -6% and -15% with the biggest impact to 2023. The broker’s revised forecast nickel prices are US$7.61/lb (-10%) for 2021; US$6.58/lb (-6%) for 2022; and US$6.35/lb (-15%) for 2023.
As a result, Citi has substantially lowered earnings FY22 estimates (EBITDA) for pure-play nickel stocks Western Areas ((WSA)) and Nickel Mines Ltd ((NIC)) by -20% and-13% respectively. IGO Ltd’s ((IGO)) FY22 earnings (EBITDA) reduction of -9% is also impacted by lower gold price expectations.
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In a 2019 Society of Actuaries survey, pre-retirees and retirees were asked about the issues that worried them most about their money in retirement.
Topping the worry list for pre-retirees? That the value of their investments might not keep up with inflation. Nearly two thirds of pre-retirees cited inflation as a key worry tied for the top slot with concerns about long-term-care expenses and ahead of worries about higher healthcare costs.
At first blush, inflationary worries seem misplaced: After all, inflation averaged less than 2.0% between 2011 and 2020. Thanks to the pandemic, it was just 1.4% in 2020.
Yet worries about inflation have been simmering in recent months, thanks to massive amounts of fiscal stimulus, a resurgent economy amid rapid uptake of the vaccine, and pent-up demand for spending once the pandemic is finally under control. The so-called break-even rate the differential between what nominal 10-year Treasury bonds and Treasury Inflation-Protected
Apr 10, 2021 at 5:10AM
Trillions of dollars of unprecedented stimulus, along with the Fed s commitment to expansionary policy, could cause rapid inflation if there s a sharp economic recovery this year. There are already signs that this process is in motion manufacturing activity hit its highest level since the 1980s, according to the ISM manufacturing purchasing managers index. That s fueling rising prices for inputs such as raw materials and labor.
It seems likely that the dollar will lose buying power as the economy reopens, and high inflation rates will affect everyone s financial plans. This is especially true for retirees. If your investments aren t set up to handle inflation, it might be time to consider slightly adjusting your strategy.