Quick Macro: Winston Churchill: "“I would rather see Finance less proud and Industry more content"

Market is 50/50 on FED hike – if the hike comes it will have nothing to do with economics, but clearly being a MARGIN CALL on asset inflation driven by mainly Stanley Fischer inside the FED. There are plenty of reasons and good economics for such a move, but… it will fall way outside the "norm" for FED hikes.

 

I created this simplistic model to illustrate how unusual a FED hike would be in the context of the economy. I think the chart speaks for itself.

 

 

This is my opinion will create the worst set-up for the market. US economy is now widely acknowledged to be slowing down dramatically, certainly relative to the elevated expectations less than one month ago, but market is now "hoping" delay is on the cards.

 

If FED moves – it will surprise market despite the move being telegraphed clearly.

 

My FOMC take for this week is:

 

·        Fed removes PATIENT.

·        They will then increasingly focus on explaining why they need to do MARGIN CALL over the next meeting and if employment holds up and wage inflation stays slightly bid they will move. (APRIL= risk-off)

·        The move is entirely driven by a need to reduce the banking sector where both the size of profit and impact on economy is too large:

 

https://hbr.org/2014/06/the-price-of-wall-streets-power

 

 

https://hbr.org/2014/06/the-price-of-wall-streets-power

 

 

 

Positions unchanged from last week.

 

Safe travels,

 

Steen

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

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