The Week Ahead is not about the Week Ahead

Aug 24 13:08 2019 Print This Article

It's the last week of August.  Several economic reports will be released in the coming days. They include the US deflator of consumer expenditures that the Federal Reserve targets, China's PMI, and the eurozone's preliminary August CPI.  It is not that the data do not matter, but investors realize the die is cast. 

They are looking further afield. The next US tax increase on Chinese imports goes into effect on September 1, and Beijing has threatened to retaliate. The Federal Reserve and the ECB will ease policy in the coming weeks.   The twice-delayed Japanese sales tax hike will be implemented in about five weeks. 

A cartoon I saw recently seems to capture the sentiment in the market at the moment.  One person was carrying a sign like the "end is nigh" and another person complains about the optimism, that this could last forever.  Whether it is the protest in Hong Kong, negative interest rates, or the US-China trade conflict, many think the status quo is unsustainable, and others believe it can persist as in a "new normal."  Paradoxically, both may be true.   The market may have gone too far in the short-term, but it does not mean a return to the status quo ante.  Some suspect that the collapse of Argentina's 100-year bond that was oversubscribed when it was sold in 2017 ($9.75 bln of bids for the $2.75 bln offering) and the poor reception to Germany's sale of a zero-coupon 30-year bond (which based on pricing was tantamount to a yield-to-maturity of -11 bp), is a turning point.  It also coincides with a ratchet up in the decibel of arguments that monetary policy is exhausted and fiscal policy is required. 

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About Article Author

Marc to Market

Marc Chandler has been covering the global capital markets in one fashion or another for more than 25 years, working at economic consulting firms and global investment banks. Chandler attended North Central College for undergraduate work, where he majored in political science and the humanities. He holds master's degrees from Northern Illinois University and University of Pittsburgh in American History and International Political Economy. Currently Chandler teaches at New York University Center for Global Affairs, where he is an associate professor. A prolific writer and speaker he appears regularly in the press and has spoken for, and is an honorary fellow of, the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009, Chandler was named a Business Visionary by Forbes. In 2009, his book, Making Sense of the Dollar, was published by Bloomberg Press and received a Bronze Award from Independent Publishers.

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