Newell Palmer: Monthly Economic Notes – May 2019
A slowing, but still growing world economy and patient central bankers are supportive of growth assets. A reduction in geopolitical risk has also served to boost market sentiment. The rally in growth assets in the first four months of this year was a snapback from fears in late 2018 of an imminent economic slowdown and hawkish US Fed rhetoric. Since then the US Fed has made a dovish pivot and markets have rallied. However, the path forward from here for markets has various risks that can bring the market lower. These risks include the path of global growth and geopolitical risks.
Newell Palmer: Monthly Economic Notes – April 2019
There are many ways to define an inverted yield curve, but one measure inverted in late March 2019, when you can earn more by buying a 3-month US Treasury note than a 10-year one. This economic gauge has recently received wide attention because an inverted yield curve has occurred prior to each of the last five US recessions. The last time the curve inverted was in early 2006 in the lead-up to the onset of recession late the next year.
Newell Palmer: Monthly Economic Notes – March 2019
In January, the US Federal Reserve put on hold its previously flagged program of interest rate rises and quantitative tightening. The European Central Bank has laid the groundwork for doing the same. The RBA has similarly signalled the possibility of interest rate cuts. The markets liked it and equity markets have rallied since January. The standard narrative is that having dealt with the GFC, central banks are trying to stimulate growth via low rates while flooding the interbank market with liquidity. This will force greater investment in risky assets, reflating the economy. Normalisation will proceed once this is achieved.