Very often, a picture speaks a thousand words. This being a journal of finance and business, there are a lexicon of words to speak and sometimes that makes it difficult to encapsulate the gist into a single picture.
We flew into Singapore's Changi Airport this week after a business trip to meet one of our clients. During the trip, we wrote a note about how the Fed might be tripping over itself by guiding market expectations for a rate hike in 2H15. Sure enough, Janet Yellen's semi-annual congressional testimony which began Tuesday saw the Fed chief taming market expectations for a rate hike - the FOMC isn't going to raise the Fed Funds Rate in the next few policy meetings. We were surpised that the dollar did not see broader weakness following Yellen's confession of future Fed policy.
To wit, from our previous note:
We will let our readers judge for themselves if growth is on an upwards or downwards trend in another short note which we will publish later on. However, without commenting much, we will go out on a limb by saying we feel the many economies will start stagnating absent monetary stimuli. Central bankers have realized this and have therefore acted on it. There is little to lie about, and even less to cover up; the face speak for themselves. We said in our last note on Daily Grail that US macro data has disappointed broadly relative to expectations since December last year, and that the FOMC might be tripping over rather unknowingly. We sense something amiss, but more on this topic in a separate piece.
The implications, if the Fed blinks by admitting it has guided expectations too hawkishly too quickly, that will be the final nail in the coffin. In our minds, the only major sticking point preventing capital from rushing into so called "hedges" against monetary inflation remains the Fed's guidance to hike rates in 2H15. This is an important note.
The concern is two-fold. Inflation and inflation expectations; economic activity and growth. We'll leave readers with one picture and one chart to accompany.
The essence is that trade volumes have dwindled to a pathetic level, a level that isn't commensurate with what the ebullient price actions of various financial assets imply. So you decide, which is which. Position yourselves accordingly.