Global Markets Podcasts

This week George Goncalves, MUFG Head of U.S. Macro Strategy, provides an update to our latest house views on the Fed and US rates forecasts post the solid September NFP jobs report. Even though the team have doubts on the overall quality of the recent NFP reading and that one number does not make a trend. At face value it was a strong report and it will likely result in the Fed cutting at a slower pace. We are now expecting the Fed to deliver a 25bp cuts going forward and tweaked on our longer term rates forecasts. 

On the back of a recently published FOMC preview report, this week George Goncalves, MUFG Head of U.S. Macro Strategy, walks us through what to expect at the September FOMC meeting and the rationale for why our house view is calling for the first cut to be 50bps. George also explores how this easing cycle may progress. 

This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews the last major macro event that happened this past Friday, the Fed’s Jackson hole symposium. Specifically chair Powell’s opening speech acknowledged that the labor market cooling is unmistakably happening now (and in reality has been in our view for many quarters) and thus the Fed has pivoted to worrying about the jobs picture. As a result, chair Powell said the “time has come” to start adjusting policy rates lower (likely at the September meeting) to help combat further labor market weakness. Given that many of the conditions that have led up to this Fed pivot formed the basis for our house view for the better part of the year, we have not made major changes to our outlook for the Fed, economy, and markets. Prior to the event we already had increased our odds for larger rate cuts, where if the August NFP is weak, the Fed will likely start this easing cycle with 50bps. Meanwhile, this month has felt much longer than the typical August summer, George echoed back to another similarly long and volatile August, the August of 2007. George believes that the conditions are different to back then but the valuation setup is similar in terms of markets that are over-valued and sentiment very complacent. George argues that 2007 taught us to value liquidity and watch out for vol triggers. 
 

This week George Goncalves, MUFG Head of U.S. Macro Strategy, puts into context how risk market preferences and a buy the dip mentality has likely led to the bounce from oversold conditions that were present at the early start of August around the adjustments of positioning.  George remains cautious and expects more episodic vol events over the end of summer into early Fall. Meanwhile George highlights what to watch and what may change chair Powell’s message at Jackson Hole with the jobs data being the driver.

This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews recent market, macro and political events in the U.S. George and team have been focused on the lags of monetary policy, the lags in how long it’s been taking for sticky inflation to unwind, and the data discrepancies in the true health of the U.S. labor market. The latest CPI report showed a better than expected inflation reading, which was a welcome sign and consistent with our house view that the worst on the inflation front is probably over.

We would be remiss in not discussing the market’s reaction to the assassination attempt on Donald Trump. Thus far this incident has been met with risk-on in the marketplace with the curve steepening and a major sector rotation in stocks, now being dubbed “Trump Trades.” We caution that a lot may be priced-in to the curve right now. Lastly, we cover what to watch for before July month-end with PCE and jobs data revisions our main focus before we speak again ahead of the FOMC.

This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews a recent special topic from the latest Macro2Markets Monthly report, where the team has found that the last few years of higher nominal activity (boosted by higher prices given elevated inflation levels) has made the economy, company earnings, and market performance look better than what they truly are.

George concludes by discussing the upcoming CPI report which should continue to point toward a lower reading as the disinflationary trends in the economy seem to be on track. The key area that the Macro Strategy team is focusing on is the evolution of shelter costs and is there finally a catch-up to more real-time measures of rental prices.

This week George Goncalves, MUFG Head of U.S. Macro Strategy, quickly reviews that first two weeks of June, which were macro event intense with various central bank meetings and inflation reports among other things. The more hawkish Fed event led to the strategy team pushing back their first Fed cut view to September from July. George believes the market becomes more technical-driven and less macro-focused into quarter-end.

This week George Goncalves, MUFG Head of U.S. Macro Strategy, gets us caught up on what has been happening in global macro and markets, with a focus on recapping the May NFP jobs report, which he believes wasn’t as strong as the headlines suggested, and that it is another report that demonstrates there are clearly macro divergences forming in various parts of the labor force.

George also provides his thoughts on what to look out for in the CPI report, where we are waiting to see if the shelter costs ever come down enough to pull inflation readings lower. Meanwhile, the CPI report takes place ahead of the June FOMC meeting where we are keenly focused on the dots (interest rate estimates) and the terminal level estimates for the core PCE inflation reading published in the summary of economic projections (SEP) by the Fed. In addition, will Chair Powell sound dovish (and echo some of the same concerns that the strategy team has around the true health of the jobs market) or will Chair Powell be hawkish. Chair Powell has threaded the needle lately with his communications, but if markets deem that his message is hawkish, after a hawkish release of the dots, a major risk-off would be in store. 
 

This week George Goncalves, MUFG Head of U.S. Macro Strategy, recaps what he has learned from the various trips he has been on while visiting investors and how it compares to our house view. He also goes over his short-term views on inflation ahead of the all-important CPI report. In George’s view, just like the last NFP report captured some of the concerns that have been forming for quarters now (and something we have been flagging), what if shelter cost declines show up now and actually start driving CPI lower, just in time for a Fed that needs greater confidence before thinking about when to ease rates ahead.

This week George Goncalves, MUFG Head of U.S. Macro Strategy, walks through what to expect at the May FOMC meeting. We believe that QT will be tapered while the Fed will start to acknowledge that real rates are too restrictive. Our base case is that Chair Powell will say tightening is working, but they are being mindful of the long and variable lags. Also, on the slightly more hawkish side, Chair Powell will likely reiterate that the FOMC lacks confidence on future inflation path and is not ready to commit to the timing on rate cuts. Lastly, George briefly highlights why we are still focused on and worried about the ongoing macro divergences in U.S. economic data and that the economy looks stronger due to fiscal policy.