Wednesday, 30 December 2015

A few macro thoughts today

A few macro thoughts on this penultimate day of 2015...

...did you pick the correct markets to back during the whole year?  Excellent chart from Bespoke Invest:

UK wages - Average wage growth next year will trail far below official forecasts. Pay will rise by about 2%, significantly below the 3.5% predictions from the Bank of England and the Office for Budget Responsibility, according to the Chartered Institute of Personnel and Development. The shortfall reflects larger businesses budgeting for the apprenticeship levy that comes into force in 2017 and smaller companies with fewer than 30 employees having to pay extra pension costs (The Times).  Not the greatest for consumption levels which - of course - is two-thirds plus of the economy…

CBI – in its new year letter the UK’s premier business lobby group has warned that ‘the government has placed a number of extra strains on UK businesses (taxes, levies, pension auto-enrolment)…urgent skill shortages…government’s visa policies are ‘wrong-headed’ and Heathrow airport expansion decision delay an ‘abject failure of leadership’. Ouch!

Asia - nice report from Bloomberg here on the shabby performance of the 'H' share index versus the Shanghai Composite.  However it was this chart of the former's discount to the world index which caught my interest: 


Italy - Renzi puts job on the line over 2016 referendum re cutting the number of senators by two thirds, strip the Senate of its ability to bring down a government and sharply limit its scope to block legislation (link here). Some political structural reform!

Portugal – country’s central bank ordered the transfer of some unsubordinated bonds at Novo Banco SA back to Banco Espirito Santo SA, the bad bank that emerged from the breakup of Espirito Santo last year and will now be liquidated, effectively imposing losses on their holders. “This measure was needed to ensure that the losses from Banco Espirito Santo are absorbed firstly by shareholders and creditors and not by the financial system and taxpayers,” the Bank of Portugal observed.  Shows the risk to (some) bonds out there.

FOMC - guess who still loves the Taylor Rule (on interest rates).  Hands up the FOMC members!


My view remains that any further rise in US interest rates in 2016 follow more the Fed Funds Future profile...up but less than the FOMC thinks.  

Finally a couple of observations.  I note today's Financial Times front page puts the boot into Berkshire Hathaway / Warren Buffett a bit for their/"his" 2015 relative performance.  Can happen at inflection point moments e.g. 2009.  Am not a Berkshire investor but no panic in my view...


...meanwhile what is happening to Natural Gas prices?!  Funny how just when you think that something like the energy markets are guaranteed to fall...

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