Markets in a Minute
with Gary Dugan
Gary Dugan is a seasoned investment professional with a 37-year track record as a Managing Director and Chief Investment Officer at some of the world’s leading banks and wealth managers in Europe, Middle East and Asia.
He is currently the CEO & CIO at The Global CIO Office and partners with SDAX to provide the latest market and financial insights.
16 April 2024
Living with US Inflation
There can be no doubt that US inflation is not on track. Last week’s inflation report showed consumer prices increased more than expected for the third month in a row. In fact, inflation is not just sticky, it’s rising. The three-month annualised super core inflation is running at 8.2%. When headline inflation hit 9.1% in June 2022, little did we know back then that nearly two years later we would still be talking about a major US inflation measure being that close to double-digit growth.
09 April 2024
A New Realism taking Hold
02 April 2024
Is This Asia’s Quarter?
26 March 2024
A Split View
The surprise from the Fed meeting statement, at least on the surface, was that they were sticking to their view that inflation was under control and that they intended to cut interest rates two or three times through the year. However, it became apparent with the publication of the dot plot that those views lacked a broader consensus, with the FOMC’s projections split between dovish and hawkish outlooks. The nine ‘hawks’ believe there may be scope for only modest interest rate cuts in 2024.
20 March 2024
The Fed under Pressure
The turmoil in the US Treasury market last week has set a tense stage for the upcoming Federal Open Market Committee (FOMC) meeting. The unexpected surge in producer price inflation has rattled the market, fueling concerns that the Federal Reserve may not lower interest rates in the near term. The 10-year Treasury yield climbed 23 basis points over the week, continuing a pattern of sharp increases. This rise underscores a significant uptrend in long-term interest rates, which have surged from a December low of 3.79% after a strong fourth-quarter performance.
12 March 2024
US Equities: Pushing the Envelope too far?
It Equity markets drifted lower on Friday, but not before scaling new highs earlier in the week. The S&P500 hit an all-time high on Thursday before the markets put in a mixed performance on Friday after a slightly confusing US jobs report.
5 March 2024
Sticky Inflation Challenges the Bond Markets
A lot has been said and done but US inflation remains sticky and is simply not slipping back into the Fed’s comfort zone.
27 February 2024
It can't just be about Tech
It was a week of contrasts. NVIDIA’s market-beating results brought some good news from the world of AI, but they were contrasted with warnings from the Fed that the central bank is on a likely go-slow with respect to interest rate cuts. Meanwhile global equity investors search for further support for the rally from the rest of the world.
20 February 2024
A US rate rise? Possibly, but not Probably
The recent inflation news flow has put the market on the backfoot. As we have discussed in our newsletters over the past three weeks, an ongoing period of disinflation has ended, although the market prefers not to admit it. The story of more inflation than the markets bargained for goes back a few weeks to the USM ISM service sector prices paid index, which showed the most significant monthly increase since 2012. Such a surge is remarkable. However, to convince the market that the phase of disinflation is truly in abeyance, we have considered a few more inflation data points. The economic data reports over the past few weeks have shown inflation hardening at around 3-4% and remaining uncomfortably above central bank targets.
14 February 2024
Markets Enjoy the Growth and Hope for Lower Rates
Equity markets continued to have a positive tone in the past week. Markets, though, are not getting carried away. The market moved higher in the fourth quarter despite worsening economic data as hopes built that the Fed must cut interest rates sooner. Based on recent financial data, Nowcast’s estimate indicates that a first-quarter US economic growth of as high as 3.5% provides further support for the market. A move or no move by the Fed notwithstanding, the market appears reasonably content with the current growth rate. We, however, choose to remain a bit more circumspect – the positive mood in the market will continue if the markets can see line of sight of a rate cut sooner rather than later. he story of more inflation than the markets bargained for goes back a few weeks to the USM ISM service sector prices paid index, which showed the most significant monthly increase since 2012. Such a surge is remarkable.
7 February 2024
Trying to Remain Sober at a Party
The US equity markets have maintained their upward momentum since the lows of October with gains spreading across various sectors, not just the tech industry, which often dominates headlines. While the NASDAQ Composite has indeed led the way in performance, the broader S&P 500 has also shown strong gains. Even the Dow Jones Industrial Average lags only four percentage points behind the NASDAQ over the same period.
30 January 2024
How Should We Invest in Equities
U.S. economic indicators continue to trend positively. As we had noted in our previous issue, the decline in inflation, driven by falling oil prices, has put more money in the hands of consumers, sparking a notable increase in spending. The U.S. Economic Surprise Index has seen a rebound in recent weeks, dispelling earlier concerns about a recession.
23 January 2024
Steady But Not Stable
A world of no surprises cannot last forever and we had said so last week. Indeed, this past week, several economic data points in the US marched into the positive territory, suggesting better momentum than many economists had expected. The Citigroup economic surprise index bounced off zero to its best level in around a month. It is encouraging that the index is no longer at neutral!
16 January 2024
Probably not Neutral
9 January 2024
Nothing has Changed but Everything has Changed
The transition from 2023 to 2024 has been characterised by a stark contrast: While investors appeared in high spirits and fully confident at the close of 2023, 2024 so far has seen them take a more cautious and subdued outlook of the future.
2 January 2024
2023 Asset Market Review
It’s shocking but true that the global equity market return (in USD) has hardly provided a positive total return in the past two years, and the NASDAQ index even gave a negative return.
2 January 2024
Ten Pointers to 2024
As we step into a new year, its crucial to understand the evolving landscape of financial markets. We look back to draw lessons and try to gauge what can be set right. We dwell on the happenings of the year gone by and try to understand what can go right – and wrong – for the markets. Below, we present ten pointers on how the markets fared and where we think we are headed.
19 December 2023
Doves in the Ascendency
The doves at the Federal Reserve were in the driver’s seat last week as the central bank’s statement and dots boosted hopes for significant policy rate cuts in 2024. The Fed is signalling three rate cuts next year; the market is pricing around six. Although the Fed has not entirely ruled out the possibility of raising rates again, the market is clearly of the view that rates have peaked and that there may be a good reason to cut rates earlier than the central bank indicates.
12 December 2023
A World of Contrasts
After a few weeks of disappointment, US economic data changed trajectory for the better, challenging the market view that US growth was rolling over and the Fed should resort to interest rate cuts sooner. Both the US employment numbers and the US consumer confidence survey came in better than expected. The November US employment report showed non-farm employment growth of 190,000, which was more substantial than expected. Hours worked per week and wage growth were stronger, too.
6 December 2023
Macro and Markets Monthly - November 2023
November was indeed quite significant if not entirely extraordinary. It showed that even minor shifts in economic outlook can significantly affect asset markets, potentially reaching a pivotal point. As evident in Chart 1 below, these shifts, though subtle, make us sit up and take notice. While the macro environment has long been besieged by inflation, November brought a much-desired relief in the form of a notable decline in inflation momentum.
28 November 2023
No Cold Turkey
The financial markets have maintained their recent upward run, which has been fueled by a stream of seemingly positive developments that have boosted equities and high-yield bonds. However, we caution against the current wave of optimism, which could face a sharp reversal if the widely anticipated gentle economic deceleration fails to materialise.
21 November 2023
How Can 0.1% Feel So Good?
Last week witnessed a notable boost to investor sentiments as the 0.1% outperformance of U.S. inflation data versus expectations prompted a discernible uptick in risk appetites. The impact resonated through the global bond markets, with a significant decline in yields—U.S. 10-year notes receded by 20 basis points (bps), paralleled by a steeper 30 bps reduction in New Zealand.
14 November 2023
A Festival of Confusion not Light
As we celebrate the Festival of Light, investors are in search of greater clarity amid the haze of conflicting economic data and central bank statements. Best of luck to you navigating these uncertain times.
7 November 2023
Nothing is For Certain
It does not feel like an environment for elevated risk taking. While the markets enjoyed the outcome of the FOMC meeting and the subsequent soft US employment report, as investors (and the central bankers) we are still living from data point to data point in the US at present.
2 November 2023
Monthly Review of Macro and Market Performance
Through October, data reports for the global economy showed stronger-than-expected growth in the United States and some stabilisation in China. Third quarter US GDP growth came in well ahead of expectations at 4.9%. Still, strong consumer spending growth was a positive feature (Chart 1).
31 October 2023
Strong US Growth too Hot to Handle?
Astute investors following the US economy would find the current trend of robust growth and persistent inflation concerning. That economic dynamic has had the Federal Reserve appear worried, too, and as we approach this week’s FOMC meeting, it’s widely anticipated that the Fed will keep the interest rates unchanged.
24 October 2023
Mounting Headwinds to Markets
In our latest presentation to a discerning group of private clients and investment professionals, we conducted a poll regarding the outlook for inflation in the United States over the next two years. The query posed was straightforward: Where will US inflation stand in two years? The results were telling, with only a mere 20% of the respondents envisioning a scenario where inflation hovers within the Federal Reserve’s target range of 1% to 3%.
17 October 2023
It doesn't get any better, it gets tougher
The Middle East is at the centre of global geopolitics once again – and this time for some very unfortunate reasons. Whether the developments will have a bearing on the financial markets is something that only time will tell, but the profound human suffering that has affected so many lives will certainly affect our collective psyche.
10 October 2023
Don't get Anchored on the Wrong Past
In times such as these, investors need help in gauging the true value of the markets. For them, one of the toughest calls to take is estimating the fair value of the US 10-year government bond yield. In the past five years, the US 10-year government bond yield has ranged between as low as 0.51% and (very recently) as high as 4.8%.
3 October 2023
A Quarterly Turning Point
The third quarter saw almost all asset classes end in the red. While global growth has remained robust, neither equities nor bonds could make any headway during the quarter as markets remained worried about central bank policies and the persistence of inflation.
26 September 2023
A Wake Up Call from the Fed
The US and, to a large extent, the world economy are finally coming to terms with the somewhat perplexing reality of resilient growth and persistent inflation. While markets have long wished for interest rates to decline, the Fed has found little room to maneuver in the face of rebounding growth and an improving unemployment situation.
19 September 2023
Policy Makers Still Hard at Work
The Federal Reserve is unlikely to announce a further rate increase at its Wednesday meeting. However, the release of a fresh round of economic projections from the central bank will shape the mood of the market. We expect the Fed to signal that a further rate hike in the near future cannot be ruled out.
14 September 2023
Macro and Markets Monthly August 2023
The global economy has become one of marked contrasts between the robustness of US growth and the struggles of Europe, particularly China. Robust economic data out of the US in the early phase of the month led to economists upgrading their GDP forecasts.
12 September 2023
Still robust growth and more inflation
Do not underestimate one of the key agreements at the G20 meetings in Delhi India, the announcement of a landmark India-Middle East-Europe Economic Corridor. The initiative has huge potential implications.
5 September 2023
Positively Negative
August saw a repeat of the 2022 syndrome. Like in 2022, both equities and bond markets delivered negative returns in August. The basic tenet of a diversified multi-asset portfolio is that equities and bonds are negatively correlated.
29 August 2023
Central Bankers Attempt to Climb Out of a Hole
Few surprises emerged from the foothills of the Teton Range in Jackson Hole last week. For some time now, it has been evident that policy makers are still concerned about the persisting inflation and the signs of a re-acceleration in growth in the United States.
22 August 2023
Maybe we should talk about 5%
The “shock” of a reacceleration in global growth even as core inflation persists and remains sticky is pushing investors – and economists – to consider levels of long-term interest rates that were previously unthinkable.
15 August 2023
Testing Times
Some economists drew comfort from last week’s US inflation report, but we believe it still does not paint a rosy picture. Core inflation, which peaked at 6.6% year-on-year last September, is still at 4.7%, indicating it remains sticky and high…
8 August 2023
US not ready to Samba
The US asset markets managed to pull themselves out of a bit of a tailspin last week. Investors sold off both equities and bonds and the recent dollar rally lost some momentum…
3 August 2023
Macro and Markets Monthly July 2023
In the early part of the month, the financial markets had fretted that global growth bordered on a mild recession. However, several data points from the US brought comfort…
1 August 2023
Growth Challenges the Market
There was a lot of news and central bank action to digest last week. Growth remains robust, inflation a little less threatening – good news for the markets but buy wisely…
25 July 2023
Look out for What they say, not What they do
There are widespread expectations that the Fed will impose a 25 basis point rate hike this week, but the markets will be more keen on what the Fed has to say rather than what it actually does…
18 July 2023
Taking the Edge off the Risks
Last week’s good US inflation report, which showed prices increased at their slowest pace in two years, somewhat blunts the risks of very high interest rates and has reinforced the…
11 July 2023
It's Getting Hot Out There
Last week was unprecedented at least on one count: the World witnessed the highest average temperature on record, not once, but thrice during the week…
4 July 2023
Central Bankers Still Hard at Work
It was amply clear from the speeches at the ECB’s annual policy conference in Sintra, Portugal that the battle against inflation is far from over. Speakers after speakers were unanimous in their views that a lot was required to be done…
28 June 2023
Geopolitics to the Fore Again
The events unfolding in Russia over the past few days have highlighted the fragility of global geopolitics…
20 June 2023
Taking a Breather
As we had suspected, the Fed took a breather last week choosing to temporarily pause its rate hike cycle…
13 Jun 2023
The Skipping Fed
The FOMC board members appear convinced about not increasing interest rates at this week’s meeting…
6 Jun 2023
Goldilocks faces off to the Fed Wolf
Investors’ interpretation of current economic data has been rather perverse. Equity markets have …
30 May 2023
Inflation Fight
The market’s wishful thinking is not coming to fruition. Inflation continues to be a problem …
22 May 2023
Japan Inc is back…
As expected, the US headline inflation rate fell to 4.9% in April. With an increase in the Fed funds rate and …
16 May 2023
Really?
As expected, the US headline inflation rate fell to 4.9% in April. With an increase in the Fed funds rate and …
9 May 2023
Stuck in the Grey Zone
Recent economic data have neither painted a picture of exuberance nor of utter despondency. Investors …
26 Apr 2023
Modest Market Returns in the Past Week as Inflation Pressure Persists
Last week was relatively quiet in both the bond and equity markets, with only modest returns. However …
18 Apr 2023
The Peaking of the United States of America
In meetings with many global investors last week, I was struck by the tangible change in attitude regarding …
11 Apr 2023
History is Not on the Side of a Fed Rate Cut
Looking back at the history of the circumstances that led to a cut in rates by the Fed, it is evident …
3 Apr 2023
Q1 2023 Market Review- Better Than It Seemed
Growth forecasts have continued to inch up, and the overall inflation scenario still needs to improve.
